Supply chain bargaining power and capital occupation
factor.formula
Customer Concentration Ratio (CCR) =
Measures the company's dependence on its top five customers. The higher the value, the higher the customer concentration. The company is more dependent on a few customers for sales and its bargaining power may be weaker.
Supplier Concentration Ratio (SCR) =
Measures the company's dependence on its top five suppliers. The higher the value, the higher the supplier concentration. The company is more dependent on a few suppliers for procurement and its bargaining power may be weaker.
Working Capital Occupancy Ratio (WCOR) =
Measures the occupation of working capital by the company in the course of operation. A positive value indicates that the company has occupied funds from upstream and downstream (for example, accounts payable is greater than accounts receivable, or advances received are greater than prepaid accounts), which may reflect strong bargaining power. Conversely, it may indicate that the company's funds are occupied and its bargaining power is weak. It should be noted here that inventory itself occupies funds, but in the upstream and downstream relationship of the supply chain, it reflects the buffering effect of the product, and the impact on bargaining power needs to be viewed dialectically.
Cash Flow Conversion Ratio (CFCR) =
It measures the company's ability to convert profits into cash. The higher the value, the higher the company's profit quality and the better the cash flow. Here, the net cash flow from operating activities is used to exclude non-cash accounting treatment (depreciation and amortization) and non-operating expenses (financial expenses), so as to more accurately measure the profit quality of the main business.
In the above formula, the meanings of the parameters are as follows:
- :
Total sales of the company's top five customers for the year.
- :
The company's total annual sales.
- :
The total purchase amount of the company's top five suppliers in the year.
- :
The company's total annual purchase amount.
- :
A short-term debt a company owes to suppliers for goods or services purchased.
- :
A liability incurred by a company when it receives payment in advance from a customer but has not yet provided goods or services.
- :
The amount a company owes to a customer for the sale of goods or services.
- :
An asset created by a company when it pays a supplier in advance for goods or services that have not yet been received.
- :
Merchandise held by a company for sale or raw materials used in production.
- :
The total revenue a company receives from the sale of goods or services during a given period.
- :
The net amount of cash inflows from a company's operating activities less its cash outflows.
- :
The net amount of a company's total profit for a certain period of time minus income tax expense.
- :
Expenses a company incurs due to the loss of value of its fixed and intangible assets.
- :
Expenses incurred by a company in raising funds, such as interest expenses.
factor.explanation
This factor is synthesized by four sub-factors with equal weights, among which: customer concentration (CCR) and supplier concentration (SCR) are inverse factors, the higher the value, the weaker the company's bargaining power; capital occupation level (WCOR) and cash flow realization ability (CFCR) are positive factors, the higher the value, the higher the company's bargaining power and profit quality. The synthesized supply chain bargaining power and capital occupation factors comprehensively consider the company's position in the supply chain and financial health, and theoretically have strong stock selection capabilities. Empirical studies have shown that companies with high upstream and downstream dispersion, strong capital occupation ability and good cash flow are often more favored in the market.