If a firms sales are $1,500,000 and it costs 9 percent to carry current as-sets, what is
Question:
If a firm’s sales are $1,500,000 and it costs 9 percent to carry current as-sets, what is the potential savings if management can increase inventory turnover from 3 to 4 times a year and increase receivables turnover from 4.5 to 6 times a year?
Step by Step Answer:
Current receivables 150000045 333333 Desired receivables 15000006 25...View the full answer
Basic Finance An Introduction to Financial Institutions Investments and Management
ISBN: 978-1111820633
10th edition
Authors: Herbert B. Mayo
Related Video
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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