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# Firm's Inventory Level and Inventory Turnover Ratio

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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?

#### Solution Preview

Dear student,

A complete solution is provided in a separate excel file attached. See below for a brief solution.

Problem: 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 ...

#### Solution Summary

The following posting helps with a problem regarding a firm's inventory level and inventory turnover ratio. The problem helps calculate how much cash will be freed up by adopting a new inventory system. The calculations are provided in an Excel spreadsheet.

\$2.19