(a) What consequence will you expect if the inventory days are reduced from 78 to 64?

(i) Profitability of the business will improve

(ii) Liquidity of the business will improve

(iii) Operational efficiency of the business will improve

(b) In which one or more of the following circumstances will it not be sensible to reduce inventory days?

(i) When the business is already suffering cash shortage

(ii) When the business is unable to meet the demand for its products

(iii) When suppliers are already pressing for payment of overdue bills

Transcribed Image Text:

xi only yi & ii z i, ii & iii