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Assume sales increase by 10% next year, and COGS (costs of goods sold) drops to 80% of sales. If the company increases its inventory ratio
Assume sales increase by 10% next year, and COGS (costs of goods sold) drops to 80% of sales. If the company increases its inventory ratio to 5:4, how much cash is generated from the reduction in inventory?
Period Ending Total Revenue Cost of Revenue Gross Profit Depreciation/Amortization Expense Other Expense Earnings Before Interest & Taxes Interest Expense Earnings Before Taxes Taxes (20%) Net Income Dividends Addition to Retained Earnings Current Year $ 7,000,000 6,300,000 700,000 300,000 420,000 (20,000) 125,000 (145,000) (29,000) (116,000) 10,000 $ (126,000) $ Cash And Equivalents Short-Term Investments Receivables Inventory Current Assets Property, plant, and Equipment (Gross) Accumulated Depreciation Net Fixed Assets 5,000 20,000 863,014 1,260,000 2,148,014 1,300,000 400,000 900,000 Total Assets $ 3,048,014 $ Acounts Payable Notes Payable Accruals Current Liabilities Long Term Debt Common Stock (10 million shares) Retained Earnings Total Equity Total Claims 517,808 720,000 479,452 1,717,260 750,753 460,000 120,000 580,000 3,048,014 $ 48.3% 1.25 Key Financial Ratios: Debt Ratio Current Ratio Inventory Turnover DSO DPO COGS/Sales 5.00 45.00 30.00 90.0%
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