Summary of Boost Business Resilience by Improving Net Working Capital

Looking for the report?
We have the summary! Get the key insights in just 5 minutes.

Boost Business Resilience by Improving Net Working Capital summary
Start getting smarter:
or see our plans

Rating

8

Qualities

  • Analytical
  • Applicable
  • Overview

Recommendation

Liquidity is one of those things you only miss when it’s gone. Boston Consulting Group professionals Tobias Wens, Ralf Moldenhauer, Jan Lindenberg and Jens Kengelbach take that truism to heart as they describe the concept of “net working capital” (NWC) and why companies should be paying more attention to it. In their clearly drawn framework for approaching NWC management, they also offer sound guidance to executives seeking to identify their best strategies to optimize liquidity.

About the Authors

Tobias Wens, Ralf Moldenhauer, Jan Lindenberg and Jens Kengelbach are professionals at the Boston Consulting Group.

 

Summary

Increasing a company’s “net working capital” (NWC) is a good way to improve its profitability.

The 2009 European financial crisis precipitated liquidity problems for many companies, forcing them to reduce debt and streamline their operations. In 2019, an extensive study of 700 companies, spanning 15 industries and 16 European nations over the 2013–2018 period, aimed to learn how firms are handling their net working capital, defined as “accounts receivable plus inventory minus accounts payable.” This metric drives cash flow, which in turn dictates a business’s needs for outside financing and its resiliency in downturns. A company that increases its NWC can fund its own business plans. As a source of cash, NWC...


More on this topic

Customers who read this summary also read

Too Smart for Our Own Good
8
Perpetual Debt in the Silicon Savannah
7
Investment Banking Explained
7
The Repo Market, Explained
9
Getting Back to Business
8
Why Is the Fed’s Balance Sheet Still So Big?
8

Related Channels

Comment on this summary