High Cash Conversion Cycle Means Companies Are Vulnerable

Global: Peaking net profit margin for Large and Medium companies, tough time for Small

• Looking at all non-financial companies globally, grouped by size
• Large and Medium companies are seeing peaking net margins
• Small companies have had a tough time with negative margin in the past three years

Global: Falling efficiency due to malinvestment

• Fall in asset turnover hasn’t come from higher asset growth, but lower sales
• Following the Global Financial Crisis (GFC), low-interest rate policies have led to malinvestments among corporates
• Small companies have seen the largest fall in efficiency

Global: Cash conversion cycle shows vulnerability to a credit crunch and/or economic slowdown

• Cash conversion cycle (CCC) has risen for all companies following the GFC, but most for Small and Medium companies
• The high CCC means that companies are more vulnerable to a credit crunch and/or economic slowdown