Explore BrainMass

Inventory Ratio and Working Capital

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Business Depot consistently sells $20,000,000 (Cost of Goods Sold) in office supplies each year. Their inventory turnover ratio has be 2 for the past few years. A new CFO with extensive industry experience has recommended a new Inventory Control System that promises to increase the inventory turnover ratio to 4 at the same level of sales. How much working capital will be freed up?

© BrainMass Inc. brainmass.com December 20, 2018, 12:09 pm ad1c9bdddf

Solution Preview

Inventory ratio = cost of goods sold/inventory

Cos of goods sold = ...

Solution Summary

This solution calculates the initial and final inventory ratio to estimate the change in working capital.