COMPANY EARNINGS

Evening Star, Issue 22780, 15 October 1937, Page 6

COMPANY EARNINGS

GROWTH IN AUSTRALIA PROBLEM OF RISING COSTS Economic recovery in Australia has been reflected very markedly in increased earnings of companies in the last two years. Almost without exception, company balance sheets have shown this year the most satisfactory improvement since the depression (states the * Argus,’ Melbourne). At the present time share prices are at a level lower than they were six months ago, although there has been no sign of any recession of business activity, or\any suggestion that company earnings are on the down grade. This phenomenon, of course, is not peculiar to Australia. It is found also m the United States, where security values have in the last few > weeks been descending precipitously, in spite of the sound economic background, with company profits generally on the upgrade. No matter how rosy the future may appear, the problem of rising costs is one which must be very seriously considered by all interested in company earnings. Expansion of trade and business invariably takes place in a period of rising prices, such as the present, and rising prices denote also rising costs. So long as prices of commodities continue on. an upward trend the increased business which generally accompanies such' a movement tends more than to offset the embarrassment which normally would bo felt by industry by rising costs. Judging on' past experience, it would not be surprising if company results in the next 12 months were to show a slight decrease in the rate of increase of profit. This would be duo solely to the increase in costs of production, which inevitably accompany a period of industrial expansion. It is when costs rise to a point at which the profit-earning capacity of industry begins to be threatened that serious apprehension may be felt. The prime factor determining the course of Industry in Australia is the state of external trade which, in . turn, is dependent upon at least the:, maintenance of the present level of export prices. Even a slight recession of export values would tend to have a dampening effect on trade and industry in the Commonwealth. It cannot be too strongly emphasised that the outlook is favourable to the maintenance of at least the present level of prosperity. All indices overseas show a continuance of the upward trend of industrial activity, a factor which suggests that commodity prices in general, especially those in which Australia is particularly interested, will hold at somewhere around their present level. THE RESERVE BANK ASSETS AND LIABILITIES [Per United Press Association.] WELLINGTON, October 14. The * Gazette ’ issued to-night con.tains the following statement of liabilities and assets of the Reserve Bank of New Zealand as at the close of business on October 11. The figures at the close of the previous week are given for purposes of comparison, shillings and pence being omitted : LIABILITIES. Last week. This week. £ £ 1. General Reserve Fund 1,500,000 1,500,000 2. Bank notes ... 12,954,005 13,081,032 3. Demand liabilitiesfa) State 5,216,108 5.233,653 b) Banks 7,351,779 7,168,143 (c) Other ... 345,189 428,287 4. Time deposit*" ~~ 5. Liabilities *.n currencies other than New Zealand curency ... ... 6. Other liabilities 138,968 139,226 Totai £27,506,050 £27,550,342 ASSETS. 7. Reserve—(a) Gol o 3,801,791 2.801,791 (b) Sterling exchange 17,463,300 17,567,432 (c) Go.d exchange - 8. Subsidiary coin 93,518 92,634 9. Discounts — (a. ommerdal and agric dtural bills ... • (b; Treasury and local body bills —•— 10. Advances—(a) To State or State undertakings—(l) Dairy industry account 3,649,635 3,606,879 (2l For other purposes 500,000 500,000 (b) To other public authorities ... (c) Otncr 11. Investments 2.906,450 2.906,450 12. Bank buildings ... ... 13. Other assets 92,365 75,154 Total £27,506,050 £27,550,342 Proportion ot rcs- ive {No. 7 less No. 5) to notes nnd otner demand liabilities 78.339% 78.011%