Our cash flow analysis carefully reviews all the processes that drive effective working capital management, as well as your strategy, policies, enabling technologies and training. Then, we apply our experience to help you implement business best practices and adapt them for your unique business needs and culture.
We use metrics such as these to assess the health of your working capital management practices, help you understand how your performance compares with peers and world-class organizations and facilitate continuous process improvement.
Measures the amount of time each net input dollar is tied up in the buying, production, and sales process before it’s converted into cash through sales to customers. The lower the number the better, a low number compared to peers within an industry indicates strong cash flow creation from internal operations.
DSO is a relative measure of a business’ debtor exposure. It measures the level of outstanding sales/revenue at the end of a month expressed in terms of the number of days sales/revenue represented by the balance of the accounts receivables (i.e., the number of days worth of sales/revenue still outstanding). This measure is typically represented as a monthly trend.
DPO is a relative measure of a business’ outstanding payment liability. DPO measures the level of outstanding payments at the end of a month expressed in terms of the number of days payments represented by the creditor balance, i.e. the number of day’s worth of payments still outstanding. The metric is useful as it gives an indicator over time of what payment terms are being accepted and complied with within a company.
DIO is a financial and operational measure, which expresses the value of inventory in days of cost of goods sold. It represents how much inventory an organisation has tied up across its supply chain or more simply – how long it takes to convert inventory into sales. This measure can be aggregated for all inventories or broken down into days of raw material, work in progress and finished goods. This measure is normally produced monthly.
ROCE is a ratio that indicates the efficiency and profitability of a company’s capital investments. The measure is important as the ROCE ratio should always be higher than the rate at which the company borrows, otherwise any increase in borrowing will reduce shareholders’ earnings.
