In reviewing Fargo Company's financial statements for the past two years, Lilian Stone, a bank loan officer, noticed that the company's inventory level had increased significantly while sales revenue had remained constant. Such a trend typically indicates increasing inventory carrying costs and slowing cash inflows. Ms. Stone concluded that the bank should deny Fargo's credit line application.
Required
Explain how implementing an effective just-in-time inventory system would affect Fargo's financial statements and possibly reverse Ms. Stone's decision about its credit line application.