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Inventory Management Williams & Sons last year reported sales of $44 million, cost of goods sold...

Inventory Management Williams & Sons last year reported sales of $44 million, cost of goods sold (COGS) of $36 and an inventory turnover ratio of 4. 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 6 while maintaining the same level of sales and COGS, how much cash will be freed up? Do not round intermediate calculations. Round your answer to the nearest dollar.

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Answer #1

cash freed up = (cost of good sold / old inventory turnover ratio) - (cost of goods sold / new inventory turnover ratio)

=> ($36 million / 4) - ($36 million/ 6)

=>$9 million - $6 million

=>$3 million.or 3,000,000.

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