Financial Results for Birmingham Wire and Cable Supply Company

Year end 12/31/15

Income Statement		Partial Balance Sheet
Net Sales	$10,000,000	Cash	$109,375
Cost of Goods Sold	$7,250,000	Accounts Receivable	$1,232,877
Gross Margin	$2,750,000	Beginning Inventory (1/1/2015)	$1,542,553
Payroll/Fringes	$2,000,000	Ending Inventory (12/31/2015)	$1,735,455
All other Expenses	$730.000	Other Current Assets	$15,625
Total Expenses	$2,730,000
Profit Before Taxes	$20,000

As the VP of Operations for Birmingham Wire and Cable Supply, one of your responsibilities is to effectively manage your wire and cable inventory. Given that a key component of your inventory is copper wire, you are very sensitive to the market price of copper since that will affect your cost of wire and cable. Lately, you have been reading where copper prices are likely to go significantly higher over the next year. Given this information and the financial results above, you need to report to the CEO your plan for your inventory purchases next year. In doing so, answer the following questions:

1. What is your current inventory turnover ratio? (Show your calculations)
2. Given the impending rise of inventory costs in wire next year, would you plan to increase or decrease your purchases of wire and cable over the next few months? Explain in detail the reasoning behind your decision (the CEO would need your explanation to provide to the companys Board of Directors).