Effect of a just-in-time inventory system on financial statements In reviewing Crocker Company’s financial statements for the past two years, Rita King, 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. King concluded that the bank should deny Crocker’s credit line application.

Required Explain how implementing an effective just-in-time inventory system would affect Crocker’s financial statements and possibly reverse Ms. King’s decision about its credit line application.