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Firm's Inventory Level and Inventory Turnover Ratio

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Please help with the following finance-related problem. Please provide the answers in an Excel spreadsheet.

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?

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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.

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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 ...

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