RDP 9308: Balance Sheet Restructuring and Investment Appendix: Data Sources and Construction

Karen Mills, Steve Morling and Warren Tease

June 1993

Graph 1: Corporate GOS and non-farm GDP are from ABS Cat. No. 5206.0, Australian National Accounts (ANA). Gross and net rates of return on capital are from ABS Cat. No. 5221.0, ANA, Capital Stock.

Graph 2: Nominal business fixed investment, and nominal gross fixed capital expenditure on equipment and non-dwelling construction data are from ABS Cat. No. 5206.0, ANA. Nominal non-farm GDP is from the same publication.

Graph 3: Data are from the Australian Stock Exchange STATEX service.[21] Total Assets are defined as the sum of the following items:

  1. Financial assets consists of cash and liquid assets and investments. Cash and liquids consist of cash and its equivalent such as cash in hand, cash at bank, and short term deposits. Investments include listed shares, options, land and buildings held for income producing purposes, non-listed shares, and joint ventures.
  2. Trade debtors are equal to net accounts receivable (that is after provision for bad and doubtful debts).
  3. Net fixed assets includes land, buildings, plant, and machinery.
  4. Stocks consist of raw materials, work-in-progress, finished goods, and tools.
  5. ‘Other’ is calculated as a residual item and would include other current and non-current assets not separately identified such as pre-payments, future tax benefits, rights, and intangibles.

Real Total Assets are calculated by deflating nominal Total Assets by the non-farm GDP deflator.

Graph 4: Data are from STATEX. Total Liabilities and Equity are defined as the sum of the following items:

  1. Total equity is calculated as the sum of ordinary equity, preference capital, minority interest, and intangibles.
  2. Debt is calculated as the sum of both short and long-term securities and loans, and bank overdraft.
  3. Trade creditors (or accounts payable to suppliers).
  4. ‘Other’ includes all other liabilities not separately identified such as accruals, and tax payable.

Real Total Liabilities and Equity are calculated by deflating nominal Total Liabilities and Equity by the non-farm GDP deflator.

Graph 5: Data are from STATEX. Sources of Funds are defined as the sum of the following items:

  1. Cash flow from operations, defined as net profit after tax, plus depreciation.
  2. Debt raisings, defined as the increase in debt holdings between any two financial years.
  3. Equity raisings, defined as the increase in total equity, defined as for Graph 4 less retained earnings (which are already implicitly included in cash flow from operations) and asset revaluations (which are a non-cash item as they are not yet realised).

Graph 6: Data are from STATEX. Uses of Funds are defined as the sum of the following items:

  1. The change in net fixed assets (defined as in Graph 3).
  2. The change in financial assets (defined as in Graph 3).
  3. Dividends.
  4. ‘Other’ is calculated as a residual item to balance sources and uses of funds and includes items not separately identified such as other non-cash items not adjusted for in cash flow from operations.

Graph 7a: Data are from STATEX and from the Reserve Bank of Australia Bulletin, Company Finance Supplements. Debt to equity is defined as total debt (at book value) divided by total shareholders funds (at book value). Debt is defined as the sum of short and long-term securities and loans, and bank overdrafts. Total shareholders funds are defined as the sum of ordinary equity, preference capital, minority interest, and reserves.

Graph 7b: Data are from STATEX. The ratio is calculated as total debt (defined as for Graph 7a) divided by the market value of equity.

Graph 8: Data are from STATEX and from ABS Cat. No. 5206.0, ANA and ABS Cat. No. 5204.0, ANA. The National Accounts interest cover is calculated as net operating surplus of corporate trading enterprises divided by net interest paid by corporate trading enterprises. The STATEX measure is defined as aggregate earnings before interest and taxes (EBIT) divided by aggregate interest paid.

Graph 9: Data in the top panel are from STATEX. The STATEX ratio of debt to equity is for the full sample of 80 companies. The STATEX ratio including non-survivors is the ratio of debt to equity for the above sample, after 13 failed companies have been added back in.

The bottom panel business credit data comes from internal sources, and non-farm GDP is obtained from ABS Cat. No. 5204.0, ANA.

Graph 10: Data are from a sample of 140 companies from the STATEX database.

Graph 11: Prime rate comes from Reserve Bank of Australia Bulletin, Table F.3. Cash flow and interest cover are derived from ABS Cat. No. 5206.0, ANA. Cash flow is defined as corporate GOS less net interest paid, and is taken as a ratio to non-farm GDP. Interest cover is defined as the ratio of corporate GOS to net interest paid.

Graph 12: The prime rate is from the Reserve Bank of Australia Bulletin, Table F.3. The real prime rate is obtained by deflating the nominal rate by the consumption deflator. The real after-tax rate is the prime rate, adjusted by the corporate tax rate, and deflated by the consumption deflator. The corporate tax rate is from Reserve Bank of Australia, Australian Economic Statistics 1949–50 to 1989–90 (Occasional Paper No. 8, Table 2.23), Commissioner of Taxation and Budget Statements. The consumption deflator comes from ABS Cat. No. 5206.0, ANA.

Graph 13: Data are from STATEX. Companies are split into four quartiles based on the absolute increase in leverage over 1981/92 to 1988/89, and the absolute decrease in leverage over the period 1988/89 to 1991/92. An index for each quartile is calculated by averaging indexes of the share prices of each of the companies in the group. This is expressed as a ratio to an aggregate index calculated by averaging indexes of all the companies in the sample.

Graph 14: Real business fixed investment is from ABS Cat. No. 5206.0, ANA. The predicted values are from the regression equation described in footnote 19.

Graph 15: Real business fixed investment is obtained from ABS Cat. No. 5206.0, ANA and is the sum of non-dwelling construction and equipment. Real non-farm GDP is from ABS Cat. No. 5206.0, ANA. Tobin's ‘q’ is calculated as in Dews, N., ‘Research Report: “Tobin's q” – some Updated Data’, Reserve Bank of Australia Bulletin, June 1986, B6–B11.

Graph 16: Cash flow is from ABS Cat. No. 5206.0, ANA and is defined as corporate GOS less net interest paid.

Graph 17: Data are from STATEX. Cash flows from operations, debt raisings, and equity raisings are as defined in Graph 5. Investment is defined as the change in fixed assets less asset revaluations, plus depreciation.

Graph 18: Capacity Utilisation data are from the ACCI-Westpac Manufacturing Survey, and is the average response over the year to the following question: ‘At what level of capacity utilisation are you working? Net Balance’. A positive number indicates that proportion of net respondents who are operating above normal capacity utilisation, and a negative number that proportion of net respondents working below normal capacity.

Footnote

The STATEX service covers a sample of companies in the All Ordinaries Index. In this paper, we use a sub-sample of 80 non-financial companies for which data are available for an 11 year period. Data are provided to the RBA in accordance with the STATEX service agreement. [21]