Question

B. if winston had kracker's number of days' sales in inventory, how much additional cash flow would have been generated from the smaller inventory relative to its actual average inventory position? round interim calculations to one decimal place and your final answer to the nearest million.

Answer 1

If winston only needed to hold 35.7 days of inventory than it would only need an average inventory per year of 3378.29 (Avg inv/avg COGS = avg daily inventory held which is 3378.29/94.6 = 35.7). It currently holds 4025 inventory on average throughout the year so it's holding 647 million dollars of inventory more than it would if it lowered its ratio to 35.7.