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Corporate free cash margin improved to 4.76% for the 12 months ended June 2009, up from the recession low of 4.12% in December 2008 and up from the 4.60% registered for the 12 months ended March 2009. The continued improvement from March to June suggests that by at least one measure, U. S. companies are healthier than they were a year ago.
Whether the recovery can be sustained is another matter, according to the study from the Financial Analysis Lab at the Georgia Institute of Technology, which studies cash flow trends each quarter.
To a large extent, companies are improving cash flow by better management of the cash cycle, which means reducing the length of time between the payments they make to suppliers and when they get paid by customers, said Charles Mulford, a Georgia Tech accounting professor and the lab's director.
“In other words, they're carrying less inventory and so that's improving cash generation,” Mulford said. “They're also cutting back on capital expenditures, which is also improving cash generation.”
Among the industries with improving free cash margin, three groups stood out—retailing, food and consumer staples, and producers of food, beverages, and tobacco.
Two sectors—life sciences, which includes pharmaceutical and biotechnology companies, and utilities had declining margins.
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