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Pavel [41]
3 years ago
8

Haberdash inc. last year reported sales of $12 million and an inventory turnover ratio of 3. the company is now adopting a just-

in-time inventory system. if the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 7.5, while maintaining the same level of sales, how much cash will be freed up?
Business
2 answers:
EastWind [94]3 years ago
8 0

If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 7.5, while maintaining the same level of sales, the cash that will be freed up is: a. $2,400,000.

<h3>Further explanation </h3>

A haberdasher is a person who sells small articles for sewing, such as buttons, ribbons and zippers in the United Kingdom. Whereas in the United States, the haberdasher refers instead to a retailer who sells men's clothing, including suits, shirts, and neckties.

Haberdash inc. last year reported sales of $12 million and an inventory turnover ratio of 3. the company is now adopting a just-in-time inventory system.

Inventory turnover ratio_{Old} = \frac{Sales}{Inventory}

3 =\frac{12,000,000}{I} dollar

3I = 12,000,000 dollar

I = 4,000,000 dollar

Inventory turnover ratio_{New} = \frac{Sales}{Inventory}

7.5 = \frac{12,000,000}{I} dollar

I = \frac{12,000,000}{7.5} dollar

I = 1,600,000 dollar

Cash freed up = $4,000,000 – $1,600,000 = $2,400,000.

So, If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 7.5, while maintaining the same level of sales, the cash that will be freed up is: a. $2,400,000.

<h3>Learn more</h3>
  1. Learn more about Haberdash brainly.com/question/9103758
  2. Learn more about inventory system brainly.com/question/10574659
  3. Learn more about the company brainly.com/question/3156992

<h3>Answer details</h3>

Grade:  9

Subject:  business

Chapter:  sales

Keywords:  

Haberdash, cash, sales, the company, inventory system

Sindrei [870]3 years ago
6 0

<span>Sales = $12,000,000</span>

<span> <span>Inventory Turnover ratio (old) = 3
</span><span>Inventory Turnover ratio (new) = 7.5
</span><span>Freed up Cash = ?
</span><span>So, let’s find out the freed up cash
<span> <span>We know level of inventory are calculated as follows;</span>
<span>Inventory = Sales Inventory turnover ratio</span>
<span>Calculating $ value of old inventory
<span> <span>Inventory Old=$12,000.0003
</span> <span><span>                         =</span>$7.5,000,000</span>
<span>  Calculating $ value of New inventory
<span> <span>Inventory New=$12,000,0075
</span> <span><span>                        =</span>$3,000,000</span>
<span> <span>The freed up cash would be=Old Inventory – New Inventory</span>
<span> <span>=$7.5,000,000 - $3,000,000
</span><span>=<span>$4.5,000,000</span></span></span></span></span></span></span></span></span></span></span>
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