营运管理外文文献+中文.docx
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营运管理外文文献+中文
AnAnalysisofWorkingCapitalManagementResultsAcrossIndustries
GregFilbeck.SchweserStudyProgram
ThomasM.Krueger.UniversityofWisconsin-LaCrosse
Abstract
Firmsareabletoreducefinancingcostsand/orincreasethefundsavailableforexpansionbyminimizingtheamountoffundstiedupincurrentassets.WeprovideinsightsintotheperformanceofsurveyedfirmsacrosskeycomponentsofworkingcapitalmanagementbyusingtheCFOmagazine’sannualWorkingCapitalManagementSurvey.Wediscoverthatsignificantdifferencesexistbetweenindustriesinworkingcapitalmeasuresacrosstime.Inaddition.wediscoverthatthesemeasuresforworkingcapitalchangesignificantlywithinindustriesacrosstime.
Introduction
Theimportanceofefficientworkingcapitalmanagementisindisputable.Workingcapitalisthedifferencebetweenresourcesincashorreadilyconvertibleintocash(CurrentAssets)andorganizationalcommitmentsforwhichcashwillsoonberequired(CurrentLiabilities).Theobjectiveofworkingcapitalmanagementistomaintaintheoptimumbalanceofeachoftheworkingcapitalcomponents.Businessviabilityreliesontheabilitytoeffectivelymanagereceivables.inventory.andpayables.Firmsareabletoreducefinancingcostsand/orincreasethefundsavailableforexpansionbyminimizingtheamountoffundstiedupincurrentassets.Muchmanagerialeffortisexpendedinbringingnon-optimallevelsofcurrentassetsandliabilitiesbacktowardoptimallevels.Anoptimallevelwouldbeoneinwhichabalanceisachievedbetweenriskandefficiency.
ArecentexampleofbusinessattemptingtomaximizeworkingcapitalmanagementistherecurrentattentionbeinggiventotheapplicationofSixSigma?
methodology.SixSigma?
methodologieshelpcompaniesmeasureandensurequalityinallareasoftheenterprise.Whenusedtoidentifyandrectifydiscrepancies.inefficienciesanderroneoustransactionsinthefinancialsupplychain.SixSigma?
reducesDaysSalesOutstanding(DSO).acceleratesthepaymentcycle.improvescustomersatisfactionandreducesthenecessaryamountandcostofworkingcapitalneeds.Thereappeartobemanysuccessstories.includingJenniferTowne’s(2002)reportofa15percentdecreaseindaysthatsalesareoutstanding.resultinginanincreasedcashflowofapproximately$2millionatThibodauxRegionalMedicalCenter.Furthermore.baddebtsdeclinedfrom$millionto$.However.Waxer’s(2003)studyofmultiplefirmsemployingSixSigma?
findsthatitisreallya“getrichslow”techniquewitharateofreturnhoveringinthe–percentrange.
EveninabusinessusingSixSigma?
methodology.an“optimal”levelofworkingcapitalmanagementneedstobeidentified.
EveninabusinessusingSixSigma?
methodology.an“optimal”levelofworkingcapitalmanagementneedstobeidentified.Industryfactorsmayimpactfirmcreditpolicy.inventorymanagement.andbill-payingactivities.Somefirmsmaybebettersuitedtominimizereceivablesandinventory.whileothersmaximizepayables.Anotheraspectof“optimal”istheextenttowhichpoorfinancialresultscanbetiedtosub-optimalperformance.Fortunately.theseissuesaretestablewithdatapublishedbyCFOmagazine.whichclaimstobethesourceof“toolsandinformationforthefinancialexecutive.”andarethesubjectofthisresearch.
Inadditiontoprovidingmeanandvariancevaluesfortheworkingcapitalmeasuresandtheoverallmetric.twoissueswillbeaddressedinthisresearch.Oneresearchquestionis.“arefirmswithinaparticularindustryclusteredtogetheratconsistentlevelsofworkingcapitalmeasures”Forinstance.arefirmsinoneindustryabletoquicklytransfersalesintocash.whilefirmsfromanotherindustrytendtohavehighsaleslevelsfortheparticularlevelofinventory.Theotherresearchquestionis.“doesworkingcapitalmanagementperformanceforfirmswithinagivenindustrychangefromyear-to-year”
Thefollowingsectionpresentsabriefliteraturereview.Next.theresearchmethodisdescribed.includingsomeinformationabouttheannualWorkingCapitalManagementSurveypublishedbyCFOmagazine.Findingsarethenpresentedandconclusionsaredrawn.
RelatedLiterature
Theimportanceofworkingcapitalmanagementisnotnewtothefinanceliterature.Overtwentyyearsago.LargayandStickney(1980)reportedthatthethen-recentbankruptcyof.Grant.anationwidechainofdepartmentstores.shouldhavebeenanticipatedbecausethecorporationhadbeenrunningadeficitcashflowfromoperationsforeightofthelasttenyearsofitscorporatelife.AspartofastudyoftheFortune500’sfinancialmanagementpractices.GilbertandReichert(1995)findthataccountsreceivablemanagementmodelsareusedin59percentofthesefirmstoimproveworkingcapitalprojects.whileinventorymanagementmodelswereusedin60percentofthecompanies.Morerecently.Farragher.KleimanandSahu(1999)findthat55percentoffirmsintheS&PIndustrialindexcompletesomeformofacashflowassessment.butdidnotpresentinsightsregardingaccountsreceivableandinventorymanagement.orthevariationsofanycurrentassetaccountsorliabilityaccountsacrossindustries.Thus.mixedevidenceexistsconcerningtheuseofworkingcapitalmanagementtechniques.
Theoreticaldeterminationofoptimaltradecreditlimitsarethesubjectofmanyarticlesovertheyears..Schwartz1974;Scherr1996).withscantattentionpaidtoactualaccountsreceivablemanagement.Acrossalimitedsample.WeinraubandVisscher(1998)observeatendencyoffirmswithlowlevelsofcurrentratiostoalsohavelowlevelsofcurrentliabilities.Simultaneouslyinvestigatingaccountsreceivableandpayableissues.Hill.Sartoris.andFerguson(1984)finddifferencesinthewaypaymentdatesaredefined.Payeesdefinethedateofpaymentasthedatepaymentisreceived.whilepayorsviewpaymentasthepostmarkdate.AdditionalWCMinsightacrossfirms.industries.andtimecanaddtothisbodyofresearch.
ManessandZietlow(2002.51.496)presentstwomodelsofvaluecreationthatincorporateeffectiveshort-termfinancialmanagementactivities.However.thesemodelsaregenericmodelsanddonotconsideruniquefirmorindustryinfluences.ManessandZietlowdiscussindustryinfluencesinashortparagraphthatincludestheobservationthat.“Anindustryacompanyislocatedinmayhavemoreinfluenceonthatcompany’sfortunesthanoverallGNP”(2002.507).Infact.acarefulreviewofthis627-pagetextbookfindsonlysporadicinformationonactualfirmlevelsofWCMdimensions.virtuallynothingonindustryfactorsexceptforsomeboxeditemswithtitlessuchas.“ShouldaRetailerOfferanIn-HouseCreditCard”(128)andnothingonWCMstabilityovertime.Thisresearchwillattempttofillthisvoidbyinvestigatingpatternsrelatedtoworkingcapitalmeasureswithinindustriesandillustratedifferencesbetweenindustriesacrosstime.
AnextensivesurveyoflibraryandInternetresourcesprovidedveryfewrecentreportsaboutworkingcapitalmanagement.ThemostrelevantsetofarticleswasWeiselandBradley’s(2003)articleoncashflowmanagementandoneofinventorycontrolasaresultofeffectivesupplychainmanagementbyHadley(2004).
ResearchMethod
TheCFORankings
ThefirstannualCFOWorkingCapitalSurvey.ajointprojectwithRELConsultancyGroup.waspublishedintheJune1997issueofCFO(MintzandLezere1997).RELisaLondon.England-basedmanagementconsultingfirmspecializinginworkingcapitalissuesforitsgloballistofclients.Theoriginalsurveyreportsseveralworkingcapitalbenchmarksforpubliccompaniesusingdatafor1996.Eachcompanyisrankedagainstitspeersandalsoagainsttheentirefieldofcompanies.RELcontinuestoupdatetheoriginalinformationonanannualbasis.
RELusesthe“cashflowfromoperations”valuelocatedonfirmcashflowstatementstoestimatecashconversionefficiency(CCE).Thisvalueindicateshowwellacompanytransformsrevenuesintocashflow.A“daysofworkingcapital”(DWC)valueisbasedonthedollaramountineachoftheaggregate.equally-weightedreceivables.inventory.andpayablesaccounts.The“daysofworkingcapital”(DNC)representsthetimeperiodbetweenpurchaseofinventoryonacccountfromvendoruntilthesaletothecustomer.thecollectionofthereceivables.andpaymentreceipt.Thus.itreflectsthecompany’sabilitytofinanceitscoreoperationswithvendorcredit.AdetailedinvestigationofWCMispossiblebecauseCFOalsoprovidesfirmandindustryvaluesfordayssalesoutstanding(A/R).inventoryturnover.anddayspayablesoutstanding(A/P).
ResearchFindings
AverageandAnnualWorkingCapitalManagementPerformance
Workingcapitalmanagementcomponentdefinitionsandaveragevaluesfortheentire1996–2000period.Acrossthenearlyfirmsinthesurvey.cashflowfromoperations.definedascashflowfromoperationsdividedbysalesandreferredtoas“cashconversionefficiency”(CCE).averagespercent.Incorporatinga95percentconfidenceinterval.CCErangesfrompercenttopercent.Thedaysworkingcapital(DWC).definedasthesumofreceivablesandinventorieslesspayablesdividedbydailysales.averagesdaysandisverysimilartothedaysthatsalesareoutstanding.becausetheinventoryturnoverrate(onceeverydays)issimilartothenumberofdaysthatpayablesareoutstandingdays).Inallinstances.thestandarddeviationisrelativelysmall.suggestingthattheseworkingcapitalmanagementvariablesareconsistentacrossCFOreports.
IndustryRankingsonOverallWorkingCapitalManagementPerformance
CFOmagazineprovidesanoverallworkingcapitalrankingforfirmsinitssurvey.usingthefollowingequatio