Inventory Ratio and Working Capital
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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?
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Solution Summary
This solution calculates the initial and final inventory ratio to estimate the change in working capital.
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Inventory ratio = cost of goods sold/inventory
Cos of goods sold = ...
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- BEng, Allahabad University, India
- MSc , Pune University, India
- PhD (IP), Pune University, India
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