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    Question about Inventory turnover ratio

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    Flannery Furnishings has $150,000 in sales. The company expects that its sales will increase 30% this year. Flannery'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 sales (in thousands of dollars) is

    Inventories = $7.50 + 0.1875(Sales).

    Given the estimated sales forecast and the estimated relationship between inventories and sales, what is your forecast of the company's year-end inventory turnover ratio?

    A 2.25
    B 2.89
    C 3.35
    D 3.66
    E 4.43

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    Solution Summary

    The solution explains how to determine the year end inventory turnover ratio.