16-1 Cash Management
Williams & Sons last year reported sales of 10 million and an inventory turnover ratio of 2. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 5 while maintaining the same level of sales, how much cash will be freed up?
Inventory Sales / inventory turnover ratio
10 million/2 5 million
Inventory Sales / inventory turnover ration
10 million / 5 2 million
Cash that will be freed up 5 million - 2 million 3 million
(16-2) Receivables Investment
Medwig Corporation has a DSO of 17 days. The company averages 3,500 in credit sales each day. What are the company's average accounts receivable?
Excerpt from file: HomeworkAssignment 161CashManagement Williams&Sonslastyearreportedsalesof10millionandaninventoryturnoverratioof2. Thecompanyisnowadoptinganewinventorysystem.Ifthenewsystemisabletoreduce the firms inventory level and increase the firms inventory turnover ratio to 5 while
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