Working Capital: A Summary of Ratios by Industry

7 Pages Posted: 30 May 2017

See all articles by Luann J. Lynch

Luann J. Lynch

University of Virginia - Darden School of Business

Graham Gillam

University of Virginia - Darden School of Business

Jennifer Forman

University of Virginia - Darden School of Business

Abstract

The case graphically presents various working capital ratios (days inventory outstanding, days sales outstanding, days payables outstanding, cash conversion cycle, and operating cycle) over the 2009-through-2012 period by industry and for specific well-known companies. Students are given the opportunity to craft an intuitive story around the ratios they are given in the case. The case works well as a supplement for classes on working capital management. It is designed to help students relate the often difficult-to-grasp concepts around working capital and working capital ratios to industries and companies that they are familiar with, using companies whose business models and business practices are particularly good illustrations of the relevant concepts.

Excerpt

UVA-C-2348

Rev. Jan. 6, 2015

WORKING CAPITAL: A SUMMARY OF RATIOS BY INDUSTRY

This technical note presents various working capital ratios over the 2009 through 2012 period 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 it takes a company 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:

. . .

Keywords: working capital ratios, working capital management

Suggested Citation

Lynch, Luann J. and Gillam, Graham and Forman, Jennifer, Working Capital: A Summary of Ratios by Industry. Darden Case No. UVA-C-2348, Available at SSRN: https://ssrn.com/abstract=2974076

Luann J. Lynch (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4721 (Phone)
434-243-7677 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/lynch.htm

Graham Gillam

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Jennifer Forman

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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