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[January 2001]
Buy now, pay later
Half of all companies in the Ceramic Goods industry increased their level of debt last year suggesting that companies are more confident than ever before. This is according to the latest Plimsoll Portfolio Analysis: February Edition 2001.
This analysis of 1000 companies also revealed that most companies are using debt in their day-to-day business. 89% of all Ceramic Goods companies had some form of debt last year. Only 67 companies showed no debt at all.
Adding debt takes confidence, not only in the future ability of the company to pay the debt back, but also to generate extra profits to justify this risk.
Why would almost 50% of the industry add debt last year? Two key reasons seem to be increasing their formal lending.
1) Companies are financing losses in a bold attempt to keep afloat and stay in the marketplace. For 104 companies borrowing money is a means of staying in business. In fact these are located and named in the analysis as having taken on more debt last year whilst funding losses.
2) Companies are investing to become more competitive believing that extra investment in assets will ultimately deliver more profit. Only 131 out of 294 companies or 45% of those adding extra debts increased profits last year.
Obviously too much debt is a bad thing. Yet using debt should not be despised. The research suggests that a typical Ceramic Goods company finances on average 21% of their assets. This statistic, however, hides the realism that almost 27% companies have a debt level twice this average.
A full copy of this Ceramic Goods analysis, February 2000 is available for £305. For more information call 01642 257800 or visit http://www.plimsoll.co.uk/
ENDS