Case

Smith Medical, Inc., is a publicly owned corporation engaged in the manufacture of medical products. In recent years, the company has accumulated large amounts of inventory as a result of profitable operations. A recent annual report showed cash, cash equivalents and inventories amounting to more than 50% of the companys total assets. During the period that these large holdings of cash, cash equivalents and inventories have accumulated, the company has paid no cash dividends.

Some financial analysts thought Smith Medical was holding too much cash and inventory.

1. Why is good inventory management essential to a firms success?
2. If the company would reduce the current assets less than 50% of the total assets, what will be the impact of this decision on company liquidity, profitability, and risk? NO plagiarism Please, Answer Must be authentic and relevant!!!