Date
2011.07.21
The ratio of a manufacturer's operating cash flow to short-term borrowing and interest reached 67.8 percent last year, up from 65.2 percent the previous year, according to a survey of 6,778 manufacturers conducted by the Bank of Korea (BOK).
The ratio measures a company's ability to service short-term debt with cash generated from operating activities. The 2010 data marked the highest level since the 88.7 percent tallied in 2007, the central bank said.
"Last year, local manufacturers' cash flows from their business activities improved as exports remained solid amid the economic recovery," Kim Jun-tae, an official at the BOK, said in a briefing.
Local manufacturers posted a net cash inflow of 13.2 billion won (US$12.5 million) on average last year, up 15 percent from the previous year as local firms logged healthy net income amid the economic recovery.
Improved earnings led Korean manufacturers to boost their investment activities like capital spending or investment in stocks and bonds and to pay out massive dividends to their shareholders.
Korean manufacturing companies posted a net cash outflow of 14.7 billion won on average from investment in 2010, up 16.2 percent from the previous year. In the cited period, their net cash inflow declined 43.9 percent on-year to 1.2 billion won due to dividend payout, the BOK noted. They paid out an average of 2.16 billion won in dividends last year.
But there was a sharp gap in cash flows and debt-service capacity between large companies and smaller firms, indicating that overall growth was driven by bigger companies.
The ratio measuring a large firms' capacity to service short-term borrowing reached 96.3 percent last year, up 6.5 percentage points from a year earlier. But the corresponding ratio for smaller companies shed 3.7 percentage points to 31 percent.
The data came as the South Korean economy grew 6.2 percent last year, aided by sustained exports, which account for about 50 percent of the economy.
Source: Yonhap News (July 21, 2011)