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Amount of cash held up between cos and suppliers at record high
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SME Times News Bureau | 06 Jul, 2021
The amount of cash held up between corporates and their suppliers hit a
record high in 2020 as the Covid-19 crisis upended the supply chains and
stalled consumer demand worldwide, leaving firms with excess inventory
levels.
This is among the key findings of the 2021 edition of JP
Morgan's Working Capital Index report published this month, Global Trade
Review reported.
The annual report, which analyses the working
capital metrics of companies listed on the S&P Composite 1500 index,
found an estimated $507 billion of liquidity trapped within the supply
chains of the S&P 1500 companies at the end of last year, the
highest level in 10 years and a marked increase on 2019's figures of
$497 billion.
"Covid-19 has further exposed the vulnerabilities
of global supply chains, which were already under pressure in recent
years as a result of the geopolitical trade tensions," said Gourang
Shah, global head of treasury and working capital optimisation for
wholesale payments at JP Morgan, who is an author of the report.
"A
key focus for finance practitioners will be to continue building supply
chain resiliency in their operations, in order to withstand future
shocks as well as to mitigate the negative impact on working capital,"
Shah said.
A closer look at the figures shows that almost
two-third of the companies experienced deterioration in their working
capital efficiencies in 2020, with aerospace and defence and airlines
sectors unsurprisingly among the hardest hit as the demand for travel
collapsed amid widespread lockdowns and movement restrictions.
Meanwhile,
the semiconductor industry showed the most improvement in working
capital efficiencies, on the back of strong sales of consumer
electronics goods and increased demand for cloud services as the global
working population pivoted to remote work arrangements.
According
to the report, the top four industries expected to show the most growth
as they rebound from the pandemic include the semiconductor,
e-commerce, pharmaceutical and technology hardware sectors.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
|
87.50
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84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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