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Your company had the following balance sheet and income statement information for 2 0 2 0 : Balance sheet: Cash A / R $ 2

Your company had the following balance sheet and income statement information for 2020: Balance sheet: Cash A/R $ 201,000 Inventories 5,000 Total C.A. $ 6,020 Debt $ 4,000 Net F.A.2,980 Equity 5,000 Total Assets $ 9,000 Total claims $ 9,000 Income statement: Sales $10,000 Cost of goods sold 9,200 EBIT $ 800 Interest (10%)400 EBT $ 400 Taxes (40%)160 Net Income $ 240 The industry average inventory turnover is 5. You think you can change your inventory control system so as to cause your turnover to equal the industry average, and this change is expected to have no effect on either sales or cost of goods sold. The cash generated from reducing inventories will be used to buy tax-exempt securities which have a 7 percent rate of return. What will your profit margin be after the change in inventories is reflected in the income statement? a.2.1% b.2.4% c.4.6% d.5.3% e.6.7%

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