Corporate Canada is in better shape than it was before the recession and posting the strongest corporate performance since at least 1990, according to a CIBC World Markets Inc. report.
The report states that corporate Canada has recorded its highest results on CIBC's composite indicator of corporate Canada's strength, since CIBC first started tracking the measure in 1990.
According to CIBC, corporate Canada is 1.36 standard deviations above its long-run average on the indicator, which assesses nine aspects of Canada's corporate sector, including debt-to-equity ratio, cash-to-credit ratio, profit margin and business confidence.
"It's encouraging that a health check on Canada's corporate sector shows businesses across the country are passing with flying colours," said Avery Shenfeld, chief economist at CIBC.
Shenfeld said that when the indicator is lower than its long-term trend, growth in business investment has been broadly stagnant.
"In contrast," he said, "those occasions when the indicator has been higher have seen investment growth average above 8%."
Shenfield said the strength in corporate Canada runs across all sectors and wasn't driven by the performance of one or two major industries.
Among other things, CIBC found that for corporate Canada:
- debt-to-equity ratios for 2011 were lower than their respective long-run averages in eight out of 12 sectors examined;
- cash holdings relative to credit have risen to an all-time high of nearly 60%;
- profit margins at Canadian companies are "within shouting distance" of their 2008 peak;
- while business confidence waned a bit in 2011, it finished the year still slightly above its long-run average; and
- the business bankruptcy rate is the lowest in at least 30 years, at three per 1,000.
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