Skip to main navigation

Working capital management: all tied up - Opportunity for improvement - EY - Global

Working capital management: all tied up

Opportunity for improvement

  • Share


The leading 2,000 US and European companies have up to US$1.2 trillion of cash unnecessarily tied up in working capital.

The wide variations in WC performance among different companies in each regional industry point to significant potential for improvement — up to US$1.2 trillion of cash is unnecessarily tied up in the WC of the leading 2,000 US and European companies.

The range of cash opportunity is defined as the sum of the WC cash opportunity derived for each company. This has been calculated by comparing the 2011 performance of each of its WC components with the average (low estimate) and the upper quartile (high estimate) achieved by its industry peer group.

On this basis, the 1,000 US companies included in this research would have in total between US$330b and US$590b of cash unnecessarily tied up in WC. This range of cash opportunity is equivalent to, respectively, between 12% and 21% of their WC scope (defined as the sum of trade receivables, inventories and accounts payable) and between 3% and 6% of their aggregate sales.

The 1,000 European companies would have in total between €270b and €460b of cash unnecessarily tied up in WC. This range of cash opportunity is equivalent to, respectively, between 11% and 19% of their WC scope and between 4% and 7% of their aggregate sales.

In total, the leading 2,000 US and European companies would have up to US$1.2 trillion of cash unnecessarily tied up in WC, equivalent to nearly 7% of their aggregate sales. This figure is similar to last year’s.

WC cash opportunity, 2011

  Cash opportunity
Region Value % WC scope* % sales
Average Upper quartile Average Upper quartile Average Upper quartile
Europe €270b €460b 11% 19% 4% 7%
United States US$330b US$590b 12% 21% 3% 6%

* WC scope = sum of trade receivables, inventories and accounts payable

Source: EY analysis, based on publicly available annualfinancial statements.

 


<< Previous | Next >>

Back to top