Managing a cash crunch

The global recession has recently shone a spotlight on the way many companies in the Gulf Cooperation Council region manage their business. Before the economic downturn, there was a collective belief that growth would continue unabated and liquidity would be endlessly available. As a result, companies chased the top line while ignoring critical aspects of their cash flow and balance sheet, making sales under terms favorable to their customers but that undermined their own profitability. They took on debt from multiple sources to build factories, took stakes in other companies, covered finance charges and cut dividend checks to shareholders. This approach to growth is akin to living on borrowed time. Liquidity issues bubbled beneath the surface while the economy was booming, but rose to the top when the global recession hit. Now, many GCC companies are in a full-fledged cash crunch. In Saudi Arabia, for instance, our analysis of 75