After 15 years of great success in boosting its operating cash-flow via “inventory lite” strategies, corporate America may be reaching the limit of how much cash it can generate via working capital management, according to an author of a new study on corporate cash generation by the Georgia Tech Financial Analysis Lab.

And if profits continue to remain sluggish, CFOs will find their companies unable to kick out the kind of cash needed to continue to offer shareholders the big dividends and buybacks they’ve been dishing out in recent years, according to Charles Mulford, a Georgia Tech accounting professor who put together the report along with graduate research assistant Sarika Misra.

Driven by an “inexorable decline in inventory” between 2000 and 2015, he says, the median operating cash flow generated by U.S. non-financial companies soared by a whopping  391.8%, the study found. (See graph, “Cash-Generating Prowess.”)

To be sure, operating cash flow is affected by changes in revenues and costs. But it’s also affected by changes in operating-related working capital measurements including accounts receivable, inventory, and accounts payable. In the case of inventory, when the costs of maintaining it decrease, operating cash flow rises.

The study shows that the inventory-lite approaches “that we’re teaching in business school are being embraced by corporate America,” Mulford says. For a decade and a half, companies have been doing a good job of “pushing [their] inventory needs off onto their vendors,” he adds, they creating a situation in which companies get the goods they need almost exactly as soon as they need them.

The problem is that the ability to increase operating cash flow by slashing inventory may have reached its limit. “There is some inventory number out there that is an absolute minimum,” the professor thinks. “I think we’re getting pretty close.”

From the finance perspective, that would mean that there are “fewer levers that CFOs can pull than they had in the past” to improve working capital performance and increase operating cash flow,” Mulford thinks. “At some point, there are no efficiencies to be gained.”

Over the 15 year-period, there was only an 83.5% rise in revenue, according to the study of 3,800 non-financial U.S.-based publicly traded companies. (See graph, “Rising Revenue.”)

Thus, the bulk of the nearly 400% rise in operating cash flow had to come from somewhere else than sales. The researchers explain that “contributing to the improving cash flow fortunes of corporate America was an improvement in working capital management, especially through reductions in inventory.”

Between December 2000 December 2015, in the year ended December 2000, “inventory days continued a relentless decline, dropping 29.7% from 22.53 median inventory days to 15.85 days,” according to the report.

“What remains to be seen is whether these firms can continue improving on their cash-generating prowess or whether the benefits from working capital management have all been achieved. An inability to continue improving on working capital management will have negative effects on growth of operating cash flow in the future,” according to the researchers.

Lacking operating cash flow, CFOs might have to make changes in their companies’ capital allocation strategy. Such cash-flow scarcity “could hurt the ability of companies to offer dividends and buybacks,” says Mulford.

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