Working Capital: A Summary of Ratios by Industry, 2016

Abstract

This technical note presents various working capital ratios from 2012 through 2015 by industry and for some well-known companies.

Excerpt

UVA-C-2388

Nov. 18, 2016

Working Capital: A Summary of Ratios by Industry, 2016

This technical note presents various working capital ratios from 2012 through 2015 by industry and for some well-known companies.

Working Capital Ratios

The operating cycle covers the time from when a company purchases inventory to sell to when it collects cash payment from its customers for the sale of that inventory. It is the amount of time a company takes to turn its purchase of inventory into cash received from customers. Several things happen during that operating cycle. The company purchases inventory, makes payment to suppliers for that inventory, sells that inventory to customers, and collects payment from customers. These events are depicted in Figure 1:

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Keywords: cost conversion, operating cycle, cash conversion