The CFO Magazine in the USA publishes information to help chief finance officers

(finance directors) in companies. The following information is extracted from its annual Working Capital Survey.

For those who rejoiced when the New York Yankees faltered at the start of this season or thought 2003 surely had to be Lance Armstrong’s last Tour de France win, here’s some exciting news: Dell Computer’s working capital performance has slipped. Well, sort of.

The undisputed champion saw its overall working capital grow by 2 days – putting it still at a mind-blowing negative 30 days in CFO’s annual survey, conducted by Purchase, New York-based REL Consultancy Group, Which, of course, leaves even Dell’s best competitors trailing behind like the Boston Red Sox. Indeed, despite a deterioration in receivables collection [days taken by credit customers to pay], Dell once again shaved its days inventory outstanding by 9% to three days (four by Dell’s slightly different reckoning). That’s so low that chief accounting officer Robert W. Davis says the company now thinks of inventory in dollars rather than days.

The CFO survey calculates the working capital in days for 67 industry sectors. Two examples are:

Discussion points
1 What do these figures tell us about the autoparts industry compared with the home construction industry?
2 Dell Computers assembles computers to customers’ orders received on the internet. How does the company’s operation help it to keep down its inventory holding period?

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Auto parts and suppliers Number of days for which inventory is held (stockholding period) Number of days taken by credit customers to pay (debtors collection period) Number of days taken to pay suppliers (creditors payment period) Number of days for which long term financing is needed from shareholders or lenders Home construction Number of days for which inventory is held (stockholding period) Number of days taken by credit customers to pay (debtors collection period) 31 55 (43) 43 181 19 Number of days taken to pay suppliers (creditors payment period) (32) Number of days for which long term financing is needed from shareholders or lenders 168