- New Report from CFO Spots Potential Credit Risks
- One in seven midcap companies could have trouble paying its bills
- CFO News
- October 09, 2009
Boston, MA, October 8, 2009
Contact: Karlo Bustos
(617) 345-9700 ext 262
A new CFO Financial Benchmarks report examines the creditworthiness of midcap companies and finds that one in seven poses a potential risk to its suppliers and business partners.
The 2009 Credit Risk Benchmarking Report, available for $50 at www.cfo.com/creditrisk, provides suppliers with a quick way to gauge which of 550 companies within the CFO Midcap 1500 warrant closer scrutiny. A complete list of companies named in the report also is available free of charge. According to recent CFO magazine survey, 40% of CFOs plan to monitor customer credit more closely--even after an economic recovery.
"Despite signs of a recovery, at least 14% of companies have been badly strained by nearly two years of recession and more than a year of limited access to credit," says Karlo Bustos, director of financial analysis and benchmarking at CFO. "And companies that struggle to pay their bills on time or are in danger of bankruptcy pose a risk to their suppliers."
The report measures each company on three factors: cash as a percent of revenue, days payable outstanding (DPO), and DPO relative to the DPO of that company's industry. The last of these measures is intended to expose which companies are underperforming regardless of the economic condition of their industry as a whole. A company that gets poor marks in all three areas is a potential credit risk.
An article in the October issue of CFO magazine, called "Credit Check," summarizes how companies performed within the 36 different industries studied. The industries with the highest percentage of troubled companies include pharmaceuticals (46%), biotech (35%), and media (26%). Across all industries, the study found that an average of 14% of companies pose a potential credit risk to their suppliers.
As with all financial benchmarks, many factors can affect a company's performance, and this report should be used only as a guide
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CFO magazine, CFO.com, CFO Conferences, and CFO Research Services together make up CFO Publishing Corporation, which is an Economist Group business. CFO Financial Benchmarks is an editorial product of CFO, the leading business publication for C-level and senior financial executives. For more information, visit www.cfo.com.