In: Accounting
Changes in Financial Ratios: A goods manufacturing company is assessing the impact of the current economic conditions. Management is hoping to improve inventory turnover by 15%. They also expect the cost of goods sold to increase by 10% due to new safety protocols.
Part A. What % change in average inventory should they expect?
Part B. Additionally, management wishes to increase their dividend payout ratio by 6%. Analysts expect the earnings per share to increase by 2.5%. By what percent will dividends per share change?
Part C. Would it be a good decision for management to increase the dividend payout ratio given the change average inventory? Why or why not?