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A firm with annual sales of $8,700,000 increases its inventory turnover from 4.5 to 6.0. How much

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A firm with annual sales of $8,700,000 increases its inventory turnover from 4.5 to 6.0. How much would the company save annually in interest expense if the cost of carrying the inventory is 10 percent?
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Current inventory 8700000Inventory 45 In...View the full answer


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Basic Finance An Introduction to Financial Institutions Investments and Management

Basic Finance An Introduction to Financial Institutions Investments and Management

ISBN: 978-1111820633

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Authors: Herbert B. Mayo

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Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.

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