Williams & Sons last year reported sales of $97 million, cost of goods sold (COGS) of...

Williams & Sons last year reported sales of $97 million, cost of goods sold (COGS) of $80 million, and an inventory turnover ratio of 5. The company is now adopting a new inventory system. If the new system is able to reduce the firm's inventory level and increase the firm's inventory turnover ratio to 8 while maintaining the same level of sales and COGS, how much cash will be freed up? Do not round intermediate calculations. Enter your answer in dollars. For example, an answer of $1.23 million should be entered as 1,230,000,000. Round your answer to the nearest dollar.

$

Expert Solution

old inventory=COGS/inventory turnover ratio

=80/5

=16 million

new inventory=COGS/New inventory turnover ratio

=80/8=10 million

cash will be freed up=16-10=6 million or 6000000

jeff jeffy answered 2 years ago

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