The relative performance of industries, like the relative performance of businesses, can be analysed using a combination of quantitative estimates (of the kind shown in earlier tables) and performance ratios. Various ratios commonly used in financial analysis are included in table 13.6. These show, for example, that in 1999-2000:
- industries which converted the highest proportion of their sales into profit (as represented by the profit margin) were Communication services, Finance and insurance and Agriculture, forestry and fishing;
- businesses in Construction, Communication services and Retail trade reported, on average, the highest return on assets;
- the industries with the highest returns on net worth were Communication services, Retail trade and Construction; and
- the greatest ability to service debt charges from profits (as represented by the interest coverage ratio) was recorded for Communication services, Construction and Personal and other services.
13.6 INDUSTRY PERFORMANCE RATIOS (a), 1999-2000 |
|
| Industry | Profit
margin
% | Return on
assets
% | Return on
net worth
% | Interest
coverage
times | Investment
rate
% |
|
| Agriculture, forestry and fishing | 18.1 | 4.0 | 4.9 | 4.3 | 39.0 |
| Mining | 17.6 | 7.4 | 18.2 | 5.0 | 39.7 |
| Manufacturing | 6.3 | 7.1 | 18.3 | 4.6 | 16.9 |
| Electricity, gas and water supply | 15.2 | 3.9 | 8.0 | 2.4 | 41.9 |
| Construction | 5.7 | 11.7 | 33.3 | 9.1 | 10.9 |
| Wholesale trade | 4.4 | 9.8 | 29.2 | 7.5 | 12.5 |
| Retail trade | 3.6 | 12.7 | 33.3 | 3.8 | 12.3 |
| Accommodation, cafes and restaurants | 6.0 | 6.1 | 13.5 | 3.7 | 19.1 |
| Transport and storage | 6.3 | 5.5 | 15.7 | 3.0 | 22.6 |
| Communication services | 20.9 | 15.1 | 35.2 | 9.6 | 44.2 |
| Finance and insurance | 18.3 | 1.5 | 8.7 | 1.5 | . . |
| Property and business services | 13.4 | 7.7 | 14.7 | 7.6 | 14.4 |
| Private community services | 8.8 | 7.8 | 13.0 | 7.5 | 14.3 |
| Cultural and recreational services | 13.6 | 9.0 | 17.6 | 7.6 | 38.3 |
| Personal and other services | 9.8 | 9.4 | 14.8 | 7.9 | 16.7 |
| All industries(b) | 9.0 | 4.0 | 13.0 | 2.6 | (c)21.0 |
|
(a) The underlying data include private employing and public trading businesses, but exclude non-employing businesses and entities in the general government sector.
(b) Long-term debt to equity and Investment rate for All industries exclude Mining, Electricity, gas and water supply and Finance and insurance businesses. Interest coverage for All industries also excludes Mining and Electricity, gas and water supply.
(c) Investment rate for All industries excludes Finance and Insurance industries. |
Source: Business Operations and Industry Performance, Australia, Preliminary (8142.0). |
The derivations of the performance ratios shown in table 13.6 are as follows:
- Profit margin is operating profit before tax as a percentage of sales of goods and services plus interest income plus other operating income;
- Return on assets is operating profit before tax as a percentage of total assets;
- Return on net worth is operating profit before tax as a percentage of net worth;
- Interest coverage is the number of times that businesses can meet their interest expenses from their earnings before interest and tax; and
- Investment rate is the proportion of industry value added used for capital investment.
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