A FIFTH of trading companies in Ireland have a negative net worth, with liabilities on their balance sheet of greater value than their assets, according to figures from ICC Information.
The business services firm said 28,513 trading companies in Ireland have a negative net worth according to their latest filed accounts – 21 per cent of the total.
The largest number of companies with negative net worth came from the construction sector, which accounted for 17 per cent of the total.
Property companies accounted for a further 13 per cent of the total, while retailers made up almost 12 per cent.
In terms of actual monetary value, leasing and renting companies had the highest total negative net worth, at more than €7 billion, with each company having an average negative net worth of €32 million.
This was followed by a combined €4.1 billion in negative net worth at financial services companies, and €3.7 billion at IT and telecoms companies.
ICC said net worth was an important indication of the value of a company as it is composed primarily of all the money that has been invested in the business since its inception as well as retained earnings for the duration of its operation.
“Negative net worth is important as it can be used to determine the creditworthiness of companies because it gives a snapshot of a company’s investment history,” said ICC Information head of business and development Michael Gannon.
“As we enter more challenging times it is important to understand exactly who you should be extending credit to and therefore decreasing your probability of incurring bad debt.
“Despite this, it is necessary for companies to differentiate between having a negative net worth and the ability to meet obligations as they fall.”
ICC examined the last filed accounts for companies over the period 2007 and 2008.
The majority of the companies with a negative net worth – more than 24,000 of those examined – were independently owned rather than owned by an overseas holding company.
