J.P. Morgan launches working capital index

Companies can identify inefficient use of liquidity and improve internal funding sources.

J.P. Morgan launched a Working Capital Index in order to enable companies to benchmark their working capital performance against the performance of S&P 1500 companies.

Through the index, corporate treasurers can unlock insights to help plan and track the progress of their working capital initiatives.

"We developed the Index to help our clients identify inefficient use of liquidity within their organizations and explore opportunities to improve their internal sources of funding,” Gourang Shah, head of Treasury Services Solutions for Asia Pacific at J.P. Morgan said in a statement.

After analysing working capital trends from 2011-2018, J.P. Morgan discovered that there is substantial liquidity trapped within the supply chains of the S&P 1500 companies, with the potential to release an estimated $460b through working capital optimisation programmes.

The industries that have shown the most improvement in optimising working capital between 2011 and 2018 are utilities, consumer staples and logistics. On the other hand, the sectors that have been challenged over the same period include aerospace and defense, semiconductors and media.

"Companies have traditionally focused on the profit and revenue side of business, with a lack of discipline on balance sheet management. However, CFOs and treasurers are now committed to improving internal sources of liquidity, making working capital optimisation an important priority," the bank said in a report.