Learn more about IBISWorld’s key terms
Read on for explanations of common terms used in IBISWorld industry research reports, or skip ahead to terms found in our company research reports.
INDUSTRY RESEARCH REPORT TERMS
BARRIERS TO ENTRY
The Barriers to Entry section outlines factors that can prevent a new company from entering the industry. This section also gives an indication of the extent to which this occurs and what constitutes those barriers. Common barriers to entry include high entry costs, government legislation and control of scarce inputs by companies already entrenched in the industry.
Capital/labour intensity is an indicator of how much capital is used in production as opposed to labour. The level is stated as high, medium or low. High is a ratio of less than $3 in wages for every $1 in depreciation; medium is $3 to $8 in wages for every $1 in depreciation; and low is more than $8 of wages for every $1 of depreciation.
The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using 2011-12 as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the 'real' growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the Australian Bureau of Statistics’ implicit GDP price deflator.
The Demand Determinants section identifies the factors that stimulate (or reduce) demand for products and services for this industry. Possible factors include the development of new products, levels of economic growth, government regulations and more.
Our reports may refer to the industry’s division, which is the broader group of similar industries (e.g. the construction division includes all related industries — everything from House Construction to Insulation Services).
Domestic demand is a measure of total consumption of goods and services within this country. This figure is calculated by adding imports to domestic production, then subtracting exports.
Employment represents the number of working proprietors, partners, permanent, part-time, temporary and casual employees, and managerial and executive employees working for an establishment during the last pay period in the financial year. Employees absent on paid or prepaid leave are included. Sole proprietors and partnerships that do not employ others are excluded.
An enterprise is a division that is separately managed and keeps management accounts. It consists of one or more establishments.
The establishment is the smallest type of accounting unit within an enterprise and controls its own productive activity. It consists, in most industries, of one or more locations in a state or territory.
Exports represent the total sales and transfers of goods produced by an establishment (or for it on commission) that are sold outside this country by the business or its agent.
Imports of goods and services represent the value of goods purchased from a company in another country and the amount payable to non-residents for the provision of services to residents. This represents the value of goods and services sent to other countries from this country.
IBISWorld bases concentration on the top four firms. Concentration is identified as high, medium or low. High means the top four players account for over 70% of industry revenue; medium means they account for 40% to 70% of revenue; and low means that they account for less than 40%.
Industry revenue (sometimes called ‘turnover’) describes the total sales revenue of the industry. It includes sales of goods and services (exclusive of excise and sales tax), whether produced by the establishment or not; transfers of goods to other establishments of the same business; bounties and subsidies on production; all other operating income from outside the establishment (such as commission income, repair and service income, and rent, leasing and hiring income); capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.
INDUSTRY VALUE ADDED
Industry value added is also called ‘industry gross product’. This figure describes the market value of goods and services produced by an industry minus the cost of goods and services used by the industry in the productive process, which leaves the gross product of the industry (also called ‘value added’). GDP is obtained by adding the gross product of all industries. This figure is calculated thus: revenue plus the increase (or less the decrease) in the value of stocks, minus purchases, transfers in and selected expenses.
All industries travel through periods of growth, maturity and decline. The Industry Life Cycle section of our industry research reports describes the industry’s current stage of development and explains why it is in that stage.
This section identifies an industry’s top companies by market share, which is calculated by the company’s revenue within the industry as a percentage of the industry revenue. A major player may be a legal entity and is the ultimate entity in that country (e.g. BHP is a player, not BHP Steel).
MARKET SHARE CONCENTRATION
The Market Share Concentration section discusses the dominance of the top players in an industry as a key indicator for industry concentration. To ensure consistency in the database, IBISWorld bases concentration on the market dominance of the top four players.
A business with no paid employees and payroll is known as a non-employing establishment. This type of company is mostly set up by self-employed individuals.
Other players may be significant players within a product segment, a niche player, or a new player who is likely to become a major player quickly.
The level of volatility is determined by the percentage change in revenue over the past five years. Volatility levels: very high is greater than ±20%; high volatility is between ±10% and ±20%; moderate volatility is between ±3% and ±10%; and low volatility is less than ±3%.
COMPANY RESEARCH REPORT TERMS
These are items of revenue and expenditure included in the operating profit (or loss) that are considered abnormal by reason of their size and effect on the operating profit (or loss) for the year.
Audit fees are the amount charged by the auditor for the purpose of auditing the company’s financial accounts for the current financial year.
Audit other is the amount charged by the auditor for consulting services other than auditing (e.g. computer consultancy work).
Audit total is the sum of audit fees and audit other.
CASH AT BANK
Cash at bank represents cash in the bank or on hand.
Current liabilities are short-term debts incurred by the company as a result of its normal business operations. Examples include unpaid bills to suppliers, outstanding wages and bank overdrafts.
Depreciation represents the accumulated depreciation for each fixed asset that the company owns other than buildings.
The number of people employed full-time by the company as at the latest balance date.
Income tax is an expense paid by the company to the government’s tax office in accordance to the current taxation laws.
Intangible assets refer to assets that cannot be touched, weighed or physically measured. This figure is taken directly from the company’s balance sheet. Examples include goodwill, copyrights, trademarks, patents, franchises and brand names.
INTEREST BEARING DEBT CURRENT
Interest bearing debt current includes every current liability on which interest is paid or payable. Examples include any loans, bank overdrafts, finance lease liability or debt security such as a bond, debenture or bill of exchange.
INTEREST BEARING DEBT NON-CURRENT
Interest bearing debt non-current includes every non-current liability on which interest is paid or payable.
Losses arising from the use of an entity's interest-yielding liabilities.
Revenue arising from the use of the entity's interest yielding assets.
Inventory refers to the value of current stock on hand.
NET PROFIT AFTER TAX
Net profit after tax (NPAT) provides the operating profit after tax and incorporates both the equity profit/loss figure and abnormal items but excludes extraordinary items.
NET PROFIT BEFORE TAX
Net profit before tax (NPBT) provides the operating profit before abnormal items and income tax are deducted.
OTHER CURRENT ASSETS
Other current assets are derived from subtracting total current assets from cash at bank, trade debtors and inventory.
Other liabilities are long-term liabilities that are debts of the company that are expected to be paid more than 12 months after the current balance date.
The other revenue figure is revenue received by the company that is not part of its operations. Examples include revenue received by the sale of plant and equipment or grants received from the government. This amount is normally derived from deducting sales revenue from total revenue.
OUTSIDE EQUITY INTEREST
Outside equity interest relates to equity in the company other than that which can be attributed to the ownership group of the parent entity.
The sales revenue figure is revenue received by the company from its normal operations.
Shareholder funds are calculated by subtracting the sum of current and other liabilities from total assets. This figure is taken directly from the company’s balance sheet.
Total assets is the sum of both current and non-current assets. This figure is taken directly from the company’s balance sheet. Non-current assets include receivables that will not be collected within 12 months (term debtors and loans), investments, property, plant, equipment, intangibles and any future income tax benefit.
TOTAL CURRENT ASSETS
Total current assets are derived by adding cash at bank, trade debtors, inventory and other current assets.
The total revenue figure is the combined total of sales revenue and total other revenue.
Trade debtors represent amounts of money owed by customers who have purchased goods or services from the company.
Trade creditors refer to companies or individuals to which money is owed. This figure is taken directly from the current liabilities section of the balance sheet.
Total liabilities is the sum of current liabilities and other liabilities.
Asset Turnover Ratio
Sales revenue / Total Assets
Trade creditors / Cost of goods sold x 365
Current assets / Current liabilities
Days Stock Held
Inventory / Cost of goods sold x 365
Trade debtors / Total revenue x 365
Dividend Payout Ratio
Dividends paid / Total revenue
Dividend Per Share
Dividend paid per outstanding share
Earnings Per Share
Net profit after tax / Number of shares outstanding
Profit before tax + Interest expense + Depreciation
Effective Tax Rate
Income tax / Net profit before tax x 100
Total liabilities / Total assets x 100
(Profit before tax + Interest expense) / Interest expense
Net Assets Per Share
(Total assets – Total liabilities) / Total outstanding shares
Profit before tax / Sales revenue x 100
Return on assets
Net profit after tax / Total assets x 100
Return on shareholders funds
Net profit after tax / Total shareholders’ funds