FIN515 Week 7 Homework Assignment

Apr 24th, 2015
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FIN515 Week 7 Homework Assignment

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Homework Assignment16-1 Cash ManagementWilliams & 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?Ans:Inventory = Sales / inventory turnover ratio=10 million/2 = $ 5 millionInventory = Sales / inventory turnover ration= 10 million / 5 = $ 2 millionCash that will be freed up = 5 million - 2 million = $ 3 m

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