Williams & Sons last year reported sales of $12 million, cost of goods sold (COGS) of $10

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Williams & Sons last year reported sales of $12 million, cost of goods sold (COGS) of $10 million, and an inventory turnover ratio of 2. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 5 while maintaining the same level of sales and COGS, how much cash will be freed up?
Inventory Turnover Ratio
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally.    Inventory Turnover Ratio FormulaWhere,...
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Financial Management Theory and Practice

ISBN: 978-1305632295

15th edition

Authors: Eugene F. Brigham, Michael C. Ehrhardt

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