I have to admit I've never properly reconciled by brokers...

I have to admit I've never properly reconciled by brokers figures on matters relating to debt.

I believe a D/E ratio should include all interest bearing liabilities (i.e. certain payables and provisions would be excluded). I think the standard version includes current and non-current interest bearing liabilities.

Boom’s 30 June 07 annual report includes the following:

Equity: $288M
Current Liabilities: $131M
Including, 1. Trade & other payables: $46M
2. Interest bearing loans: $70M
3. Provisions: $10M
4. Tax payable: $1M
5. Other: $4M
Non-current Liabilities: $183M
Including, 6. Interest bearing loans: $169M
7. Tax liabilities: $14M

Ordinarily you would include 2 and 6 to get a D/E of 83% which is what my broker had. Nice to know my broker is using accurate numbers.

One interesting point on Boom’s debt is the high portion of leases/hire purchase contracts included in their interest bearing debt. Now D/E is essentially a risk related ratio, a hire purchase is lower risk than a bank loan. At the end of a hire purchase contract you either hand over the final payment or the leased asset. A bank loan or bill doesn’t have an offsetting asset to work with, if you can’t roll it over (which is the primary fear driving debt concerns at present) you have to pay up (if you can).

Note 18 in Boom’s annual report lists $30M worth of current leases/hire purchases and $129M of non-current. That leaves only $34M worth of current bank style debt and $40M non-current. The risk issues related to Boom’s debt are a minor concern in my book.

I hold a recently purchased position of 6.000.