a) Widgets Inc. has recently automated its billing and payment processing system by connecting with its customers online. This online system processes all the orders it ships to its customers. As a result, it has reduced the average number of days between billing a customer and receiving payment by 15 days. How will this affect their receivables turnover ratio?
b) Some of Widget Inc.'s initiatives (like vendor managed inventory and rapid replenishment programs) in their supply chain operations have increased their inventory turnover ratio from 4.5 to 8. Is a higher inventory turnover ratio desirable? Why or why not?
c) Though the receivables turnover ratio and the inventory turnover ratio are two different measures, there is some similarity in their logic. What is the common thread between these two efficiency measures?