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Cleaner (Balance) Sheets: The 2009 Working Capital Scorecard

Hard times have inspired companies to wring lots of cash out of working capital. How much better can they get?

Randy Myers, CFO Magazine
June 1, 2009

Tax not include A/R

If the company purchased goods for inventory, vendors will charge tax to the company. We calculate cost of good sold not include purchasing tax, and then selling the product to the buyer plus tax. In my country known as Value Added Tax ( VAT ). The company will make journal ( if credit not cash ) A/R against Sales. In A/R , tax exclude !

Posted by Hendra Raharjaputra | November 16, 2010 10:32 pm

Hard times have inspired companies to wring lots of cash out of working capital. How much better can they get?

CBI director-general Richard Lambert said the economic outlook is improving. The UK's economic recovery will not pick up pace until the middle of next year, a business group has warned.The CBI said economic growth would remain fragile in the near-term due to the end of stimulus measures, such as the reduction in VAT and the car scrappage scheme.It said consumer spending would also remain subdued this year as people saved more and worried about job security.The group is predicting economic growth of 0.3% and 0.4% during the first two quarters of 2010, followed by growth of 0.5% during the second half of the year.It said the pace of growth should then pick up during 2011, as global demand, consumer spending and business investment strengthened. We want to show off. When the recession came in August 2008 the oil was going slightly up and many predicted it would shoot to $300. Then I read the Article by Robert Fisk on, "Dark side of Dubai". This was another error we emotionally as reporters make. Here is what I mean. You have money in your banks. You want to invest. You approach the bank. Call them Lehman, Citi, Barclay and auditors like Deloits etc. They give you the go ahead and back you up. Then all of a sudden the over all market sees the investment has gone a little down. We scream wolf. There is panic. Whop set this up. The reporters. The construction in Dubai and Abu Dhabi are still going on. The Metro is open and more building are coming up. I admit there is a slower progress then before. However you cannot call this a "Period. The economy is out and Dubai is bleeding". It is not. Few building incomplete does not mean the flight to Dubai for job seekers are empty. They are full. So,me cars were abandoned at the the airport. The right scenarios per the traffic was 24 cars were left . The owners could not pay. This may not be hearsay but I was told 3000 cars were left. The airport at time can only take about 200 cars. This is international airport and elite. We are misled and we begin to believe. There is nothing worse coming by May this year. I am fully confident that by tend this year we will be seeing the grey clouds lift off. I thank you Firozali A.Mulla DBA I thank you. Firozali A.Mulla DBA

Posted by Firozali Mulla | March 22, 2010 01:00 am

Calculation formula

I will compare the figures, for this reason I am locking for the exact calculation formula (e.g.turnover with or without purchase tax, or does receiveables include receiveables from alied companies...) Can sombody help me?

Posted by Mario Harg | March 17, 2010 04:54 pm

It's All about Timing

George, Thank you for your comment. You are correct that the year-end recession will have affected the CFO Working Capital survey results. The results would indeed be different if we took the average of the four quarters rather than year-end balances. We've done other stories that do look at quarterly changes (see, for example, "Working Capital: Fourth and Goal"). But for 12 years now, our annual scorecard has always looked at full-year numbers. We believe this is appropriate. We do not normalize the results for booms or for busts. If sales drop, companies still have an opportunity to manage inventory and receivables before year end, and the best performers will have done so. Because we don't adjust the results for macro-economic changes, the trend data we report demonstrates which companies continue to manage WC well despite external pressures. It is certainly true that some companies will show serious deterioration as a result of swelling inventories, lengthening receivables, or a precipitous drop in net sales that hit them late in the final quarter. Over time, however, we believe the trend data will continue to demonstrate who the top performers are.

Posted by Tim Reason | August 19, 2009 11:43 am

Timing difference

I normally think the CFO Working Capital survey is very helpful in benchmarking performance. I am very worried that the 2008 measures got trapped in the year-end recession. The measure uses full year sales versus the end of year balances in the three working capital components. With the big year-end falloff in business, do we think this timing difference to full year sales still gives us meaningful figures?

Posted by George Hartley | August 19, 2009 11:11 am

Practically Insightful WCM

A must read for a management students to get an insight into working capital issues/scorecard in the downturn-Prof.Gurbir S Khera-Finance & Management educator-Asian Business School(Delhi-NCR-thinkkhera@yahoo.com)

Posted by Profgurbircma Khera | July 12, 2009 12:42 pm

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