Inventory level and its inventory turnover ratio
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17-11 Regression and inventories Charlie's Cycles Inc. has $110 million in sales. The company expects that its sales will increase 5% this year. Charlie's CFO uses a simple linear regression to forecast the company's inventory level for a given level of projected sales. On the basis of recent history, the estimated relationship between inventories and sale (in millions of dollars) is as follows:
Inventories = $9+0.875(sale)
Given the estimated sales forecast and the estimated relationship between inventories and sales, what are your forecast the company's inventory's years-end inventory level and its inventory turnover ratio?
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The solution explains the calculation of inventory level and the inventory turnover ratio
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The sales value in the coming year = 110 X 1.05 = 115.5
The inventory value at ...
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