CFO's maintaining optimism on economy, earnings through 2002


Morristown, N.J. and Durham, N.C. - Chief financial officers of United States companies believe that the economy will bounce back to normal in the coming 12 months, and generally expect their companies to report increased earnings, according to an annual survey conducted by Financial Executives International and Duke University’s Fuqua School of Business.
  Nearly all of the 260 CFOs who participated in the poll think that GDP growth will be positive over the next 12 months, with the GDP expected to grow by 2.3 percent. Some 78 percent of the executives surveyed are more optimistic about the economy this quarter than they were last quarter, with just 3 percent voicing less optimism about the future.
  That optimism translates into a projected return of 7.2 percent for the S&P 500 Index in the coming year.
  In addition to economic predictions and forecasts for their own companies, participants in the quarterly CFO Outlook Survey provided their observations on current hot spots in financial reporting: audit committees, auditors and financial reporting rules. 
  Accompanying this renewed optimism in the economy, the CFOs predicted a recovery in corporate earnings. Eighty-eight percent of CFOs expect earnings improvements at their companies over the next 12 months, with a median growth of 10 percent.
  When polled about their companies’ current conditions, 24 percent of the CFOs said that their companies have not begun to recover from the recession. Another 40 percent said their recovery is just beginning, 12 percent are "moderately" recovered, while 7 percent are nearly fully recovered. And 17 percent said that their companies never slowed down, even during the 2001 recession. 
  The manufacturing industry is suffering the most according to the poll, as 36 percent said that they’re not at all recovered, and another 38 percent from that sector indicated that their recovery is just now beginning.
  In regard to current financial reporting concerns, 84 percent of those surveyed at public companies think that purposely misleading financial reporting among publicly held companies is rare (very or somewhat). 
  In terms of the aggressiveness of their own auditors at probing their accounting methods and financial reporting, 85 percent of public companies revealed that their auditors are very or somewhat aggressive. With respect to audit committee oversight, 83 percent said that their audit committees are very, or moderately, proactive in asking tough questions.
  When asked their opinions about financial reporting, some 52 percent think that current disclosure rules do not adequately serve investors.
  Eighty-six percent of all CFOS surveyed think that financial disclosures should be made easier to understand and over half (53 percent) think that companies should be prohibited from receiving auditing and consulting services from the same firm.
  Only about one-third of the respondents thought that companies should be required to periodically change auditors. But CFOs in the poll were somewhat equally divided about the speed that should be required for reporting financial information to investors. About 47 percent thought that the reporting should be speedier, while 53 percent did not.
  Meanwhile, two-thirds of firms expect to increase their number of employees during the next year, compared to one-third that will reduce employment. Overall, employment is expected to increase by 0.4 percent over the next 12 months.
  The Morristown, N.J.-based FEI is a trade organization that is comprised of some 15,000 chief financial officers, treasurers and controllers.

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