REL/CFO Magazine U.S. Working Capital Survey

REL and CFO magazine has completed their Annual Survey of U.S. Working Capital. The study presents information on the working capital performance at the largest 1,000 US headquartered public companies by revenue for FY2008. The working capital performance metrics were calculated from FY2008 year end results, focusing on revenue, trade receivables and payable( excluding accruals, deferred income and other cash and cash equivalents), and inventory. Adjustments were made to reflect the impact of off-balance sheet arrangements in order to provide true, consistent and comparable figures.

In a slowing economy working capital became a key source of cash for a corporation. The survey showed that working capital improved by a large figure-6.4%- the largest improvement in the past five years. It is important for companies to continue the working capital improvement programs continue even when the economy improves. The research shows that 57% of the companies continued to show improvements over their results in 2007.

Revenue increased by about 10.3% on aggregate for the US1000 in 2008. A total of 787 companies posted an increase in revenue. The study combines revenue growth with gross margin performance. In 2008, 433 companies saw revenue grow but gross margins decline.

The authors state that they feel that improving working capital is still a focus for most companies. The industry sectors that showed the most improvement were- Air Fright and Logistics, Auto Components, Computers and Peripherals and Metals and Mining. Sectors that were trailing were Diversified Telecommunications Services, Wireless Telecommunication Services, Software and Paper and Forest Products.

" The top 1,000 companies have $776bn of cash unnecessarily tied up in working capital, which represents 33% of their total working capital scope. During times of high demand volatility, shrinking margins, cost pressures, currency deflation, commodity pricing deflation and overall weak outlook on consumer confidence, companies should be aware of the cheapest form of cash- effective working capital management.

For the complete report please go to the CFO website

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