An important financial performance measure is the return on investment: LO2 ROI = Profit Total assets Assume

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An important financial performance measure is the return on investment: LO2 ROI = Profit Total assets Assume that inventories are 34% of current assets.

a. Consider the typical company and assume that it has a ratio Current asset Total assets = 0.40 What impact will a 25% decrease in inventory have on the ROI? What percent decrease in inventories is needed to increase the ROI by 10%?

b. Develop an algebraic expression for the impact on ROI of an x% decrease in inventories when Current asset Total assets =

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