I am a huge fan of CFO Magazine year-round, but I am always looking forward to my September edition, which includes their Working Capital Scorecard feature.
The 2008 Working Capital Scorecard takes a look at the working capital position of the largest 1,000 public U.S.-headquartered companies. Granted, this has little bearing on most entrepreneurial ventures, who typcially get hit with economic, industry and market shifts before these larger players. However, it does give us some feedback on where the industry is headed (or has been heading), or why vendors approach negotiations in a certain way.
These companies, as stated in the article, have to keep a keen eye on working capital, even though they are big and have the cash to buy their way out of problems. Interestingly enough, though, when I speak to most entrepreneurs, they do not feel the same way – even though cash is always tight. Wouldn’t working capital be one of those key financial statistics that, along with gross and net profit, should always be carefully measured? Especially since it deals with cash management?
Why is that?