Effect of a just-in-time inventory system on financial statements In reviewing Kopplin Company’s financial statements for the past two years, Nancy Martin, a bank loan officer, noticed that the company’s inventory level had increased significantly while sales revenue had remained constant. Such a trend typically indicates increasing inventory carrying costs and slowing cash inflows. Ms. Martin concluded that the bank should deny Kopplin’s credit line application.
Required
Explain how implementing an effective just-in-time inventory system would affect Kopplin’s financial statements and possibly reverse Ms. Martin’s decision about its credit line application.