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Treasury and Payments

How to Benchmark Your Working Capital

As the economic recovery starts to take shape post pandemic, effective working capital management is now center stage for global companies as they look to optimize supply chains and release trapped liquidity to fund business and opportunities for expansion.


 

J.P. Morgan’s 2021 Working Capital Index report provides treasury and finance professionals with insights into the working capital performance of the S&P 1500 companies in the past year. We also assess the impact of the pandemic outbreak across industries and focus on how companies can better manage liquidity risks going forward.

The report captures trends from the Working Capital Index, Cash Index and Cash Conversion Cycles (CCC) of the S&P 1500 from 2011 to 2020.

What is a cash conversion cycle?

CCC 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 is represented as:

The Cash Conversion Cycle (CCC) is the number of days it takes to convert inventory purchases into cash flows from sales. The CCC is a metric that helps quantify the working capital efficiency of a company and is derived from three different components:

Days Sales Outstanding (DSO) or the number of days taken to collect cash from customers

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

Days Payable Outstanding (DPO) or the number of days from the time a company procures raw materials to payment to suppliers


 

Download the 2020 and 2019 Working Capital Index reports.
To learn more, please contact your J.P. Morgan representative.

 


Working Capital Report Industries

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