Working Capital Report 2018/19

Navigating uncertainty

Unlocking cash to shore up your business

Essential elements

Cash is the cornerstone and most important element of any company. Optimising this central element should be on top of the list of businesses’ priorities in financial performance, if they are aiming to preserve stable progress in an unstable environment. Considering that working capital is the cheapest source of cash, it is now more important than ever to maintain a healthy cash culture and good liquidity on hand.

€1.3 tr. cash release could be attainable if all businesses, that were included in the study, were to efficiently develop their working capital efficiency to the level of the next performance quartile. Increasing that efficiency would also provide a 55% boost in international companies’ capital investments, without having to resort to further funding or jeopardizing their cash flow.

Explore our report

Background and prospects

Over the past five years, we have reviewed and analysed the financial performance of the largest global listed companies. Here are our finding of what challenges lie ahead:


1) The challenge of cash conversion

Companies are still having difficulties converting additional revenues into cash, despite a 10% increase in revenue.

2) Capital expenditure is continuing to decline

Cutting investment, a seeming trend to manage cash flows, could be a cause in the decline in capital expenditure (capex) as a percentage of revenues in the past five years. Companies don’t need to put their cash flows under pressure to release the necessary funds for investments or risk being under-invested , but rather they should work on optimising their own working capital.

3) Gone are the days of cheap borrowing

The recent instability and fiscal tightening around global trade calls for companies to have their balance sheets prepared and ready to handle the forecast of the trending higher cost of cash.

4) Marginal improvements

We found that companies’ Net Working Capital (NWC) performance in our study signified a 0.4 NWC days improvement. This could be due to the slight progress achieved in Days Sales Outstanding (DSO) and Days Inventory On-hand (DIO) of 0.1 and 0.7 days respectively- in five years.

Where do I stand?

Find out the value of your own business, as well as any potential takeover candidate with our e-valuation tool.

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What about my performance?

Our eValuation tool performs the calculations based on monthly updated capital market data and using recognised valuation methods. The results of the calculations are delivered in a graphical form on a clearly structured dashboard.

 

Enterprise value as present value of expected future free cash flows

 

 

 

 

 

Industry-specific comparison of key financial indicators

Our Role

At PwC Switzerland, we can help you:

  • Draw up comprehensive company analyses, business reviews and reorganisation reports.

  • Make your company more efficient and productive in the short to medium term, improve your revenue situation and ensure your company’s viability.

  • Free up any available liquid resources.

  • Develop immediate measures to activate your working capital and release liquidity in the short term.

  • Recognise any crisis-prone business units and analyse alternatives before selecting and implementing the necessary resources.

Contact us

Reto Brunner

Partner Advisory, PwC Switzerland

Tel: +41 58 792 14 19

Benjamin Rutz

Director Business Restructuring Services, PwC Switzerland

Tel: +41 58 792 2160