Forget the Float?
In a tough operating environment, negative working capital isn't always a plus. By Ronald Fink
2001 Working Capital Survey Charts
Click on an industry to view the companies best able to squeeze cash flow out of working capital.
Construction & Materials
Containers & Packaging
Entertainment & Leisure
Food & Beverage
Food Retailers & Wholesalers
Forest Products & Paper
General Industrial Services
Home Construction & Furnishings
Mining & Metals
Oil & Gas
Pharmaceuticals & Biotech
Technology, Hardware & Equipment
Textiles & Apparel
Behind the Rankings
The management of working capital combines two measures, weighted equally:
1. Days of Working Capital (DWC) = (Receivables + Inventory Payables) ÷ (Sales ÷ 365 Days). If payables exceed the sum of receivables and inventory, DWC is negative.
2. Cash Conversion Efficiency (CCE) = Cash Flow from Operations ÷ Sales.
The overall ranking: (Highest Overall CCE Company CCE) ÷ (Highest Overall CCE Lowest Overall CCE) + (Lowest Overall DWC Company DWC) ÷ (Lowest Overall DWC Highest Overall DWC). Days of Sales Outstanding (DSO), Inventory Turns, and Days of Payables Outstanding (DPO) are not part of the overall ranking criteria. Industry averages consider all companies in an industry, not just the top five.
Sources: REL Consultancy Group, Piranha Web