US corporate debt has increased steadily while working capital performance has deteriorated since the financial crisis, according to the 2015 working capital survey published by REL Consultancy.
Some of the main factors behind the survey's findings are the current low interest rate environment and weak oil and gas prices. Consequently, companies are relying on credit and aren't working hard enough to optimise their receivables, payables and inventory. REL estimates that US companies could collectively “achieve” over $1 trillion (or 6 per cent of the US GDP) in terms of working capital if all companies were as efficient as the top working capital performers.
The survey's main findings include:
- US corporate debt has increased significantly for the seventh consecutive year;
- in 2015, corporate debt of those surveyed increased by 9.3 per cent;
- the total debt position of companies surveyed has increased by over 58 per cent since 2009;
- the average cash conversion cycle of the companies surveyed is now 35.6 days, which is the shortest since 2008;
- companies in the oil and gas industry saw the biggest deterioration in the cash conversion cycle;
- companies with the most efficient working capital practices are seven times faster than the average company at converting working capital into cash.
The survey gathered answers from 1,000 big publicly-listed US companies during 2015.
Like this item? Get our Weekly Update newsletter. Subscribe today