Working Capital Management

Escrito el 2 diciembre 2008 por Francisco López Lubián en Uncategorized

Operational working capital is formed by short term assets and liabilities any company need as a consequence of day to day operations. In fact, operational working capital is also called Net Current Assets, and it is equal to current assets minus current liabilities.

Properly managed, operational working capital is a source of liquidity and, eventually, of economic value. Every year, CFO magazine publishes a Working Capital Scorecard, ranking working capital performance of the 1,000 largest public US-headquarters companies. http://www.cfo.com/media/pdf/0809WCcharts.pdf

According to 2008 data, 61% of the 57 industries covered improved their days of working capital (DWC) last year by an average of 8%. On a weighted working-capital basis, the 10 most improved companies released $1 billion or more each, a 26% improvement on their average DWC .

This DWC metric does not include cash in hands or similar financial short term investments. Interestling, Cash as a percentage of Sales in 1,000 largest public European companies had the evolution shown in Exhibit 1. For these companies, estimated cash in excess is


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