Princess Systems, Inc. has the following turnover ratios: Receivables turnover = 6.0x; Inventory turnover = 4.0x; Payables
Question:
Princess Systems, Inc. has the following turnover ratios: Receivables turnover = 6.0x; Inventory turnover = 4.0x; Payables turnover = 3.75x
(a) Now assume that the firm’s days inventory held (DIH) holds constant at the value you obtained in
(b) Above (when the inventory turnover was 5.5x), but the payables turnover increases to 5.3x. If the firm wants its cash conversion period to be no greater than 35 days, what must be the firm’s new receivables turnover?
Step by Step Answer:
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Statistics The Art And Science Of Learning From Data
ISBN: 9780321755940
3rd Edition
Authors: Alan Agresti, Christine A. Franklin
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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