This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Despite Small Improvement In Working Capital Performance Largest U.S. Cos Now Have A $900 Billion Improvement Opportunity

The ability of the largest U.S. companies to collect from customers and manage inventory improved just slightly in 2011, while payables performance worsened, according to the 14th annual working capital survey from REL Consulting, a division of The Hackett Group, Inc. (NASDAQ: HCKT), and CFO Magazine.

Overall, working capital performance improved slightly for 1000 of the largest U.S. public companies in the REL/CFO analysis, and working capital performance remains near the best levels seen in the past decade. But in large part the improvement was due to revenue growth.

The study found a tremendous improvement opportunity in working capital management. Companies in the study now have over $900 billion in excess working capital, a figure that represents nearly 7 percent of the U.S. Gross Domestic Product (GDP) and is the largest opportunity in this area in the past five years. Compared with top performers by industry, typical companies collect from customers 16 days slower, pay suppliers nearly 10 days earlier, and maintain nearly double the inventory, according to the REL/CFO analysis. The study also found that few companies have been able to generate sustainable long-term improvements to working capital performance.

The REL/CFO research found that while U.S. companies are beginning to reinvest in anticipation of growth, with capital expenditures rising by just over 23 percent, they are also continuing to stockpile cash, in part by relying on low-cost debt. Cash on hand levels rose to nearly $1 trillion for the companies in the REL/CFO analysis, an all-time high. Total debt increased by 6.8 percent since 2010 as well.

In addition, despite significant revenue growth, the REL/CFO study found that gross margins and EBIT margins were down slightly compared to 2010. Operating expenses were also up nearly 13%, outpacing revenue, driven largely by an increase in the cost of IT, finance, and other business services functions.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs