(Example 4-7) Subway is constructing a five-year plan. The firm's ACP is currently 90 days, while its inventory turnover ratio is 3 based on COGS. The company has forecast aggressive revenue growth along with efficiency improvements in manufacturing and credit and collections as follows:

(Year 0 is the current year.)

Year

	0	1	2	3	4	5
Revenue	$ 50,000	$ 60,000	$ 70,000	$ 80,000	$ 90,000	$ 100,000
Cost Ratio	60%	59%	58%	57%	56%	55%
ACP (days)	90	80	70	60	50	40
Inventory Turnover	2	3	4	5	6	7

For each planned year:

a. Calculate the COGS.

b. Calculate the A/R balance at year-end.

c. Calculate the inventory balance at year-end.

		0	1	2	3	4	5
a	Cost of Goods Sold
b	Accounts Receivable
c	Inventory