Benchmarking Your

Working Capital

For CFOs and Treasurers, the performance of working capital is critical but benchmarking success and understanding industry trends can be complex. To address this, J.P. Morgan is introducing the J.P. Morgan Working Capital Index that captures the working capital metrics of the S&P 1500 companies from 2011 through to 2018.

The Index combined will allow companies to benchmark working capital performance, track industry trends and understand drivers.

This report will also capture trends based on the cash levels and Cash Conversion Cycles (CCC) of the S&P 1500 companies.

CCC is a metric that helps in quantifying how efficiently a company is managing its working capital. It measures the amount of time it takes to convert inventory purchases into cash flows. CCC formula is represented as:

CCC = DIO + DSO - DPO

Created with Sketch.

CCC Terminology

Days Inventory Outstanding (DIO) measures the average number of days the company holds its inventory before selling it.

Days Sales Outstanding (DSO) measures the average number of days before a company collects payment after a sale is made.

Days Payable Outstanding (DPO) reflects the average number of days a company takes to pay its suppliers.

Key Takeaways At A Glance

$460bn

Estimated working capital that can be released across S&P 1500 companies

Top 3 industries showing
deterioration in CCC in last 8 years

(Number of days the CCC lengthened by)

19.3 18.7 17.4 Aerospace & defense Semiconductors Media

Top 3 industries showing
improvement in CCC in last 8 years

(Number of days the CCC shortened by)

14.7 11.8 3.3 Utilities Consumer staples Logistics

CCC Highlights

Created with Sketch. 53% of companies saw an improvement in CCC in 2018 67% of which improved their DPO

Top 3 industries showing
decrease in cash levels in last 8 years

9.9% Semiconductor 7.5% Airlines 4.4% Healthcare

Average CCC difference between the
top and bottom performers across industries

85 days

CCC of big versus
small companies

53 days 78 days

Small companies take 25 days longer
than big companies to convert inventory
into sales cash flows

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