Good Capital Investment

CFO has a nice article on capital spending, including their own scorecard for various companies.

Meanwhile, PRTM's new study of spending at 300 companies — presented here as CFO's first capital-spending scorecard — shows just how deep, and wide, the capital-spending trough has been. During the past four years, the 20 largest U.S. and foreign companies in 15 capital-intensive industries reduced their expenditures by 17.9 percent. The total for the companies in the study came to $533 billion in 2003, compared with $649 billion in 2000. And the decline in spending came despite a 9 percent increase in revenue for the group during the same period. Unless these companies are about to abruptly reverse course — and there's little evidence beyond the latest durable-goods report to suggest they will — it seems clear that the U.S. and global economies will continue to be held back in the near term by weak expenditures.

Yet the study also gives reason for optimism. By tracking the top performers in capital spending as measured by return on gross fixed assets (see "Measuring Capex," at the end of this article), our scorecard shows that companies can spend more on capex without hurting their bottom lines.