Question

Use the following information to answer Questions 12 - 15. Below is selected data for Gertup Corporation as of 12/31/05: Gertup has maintained the same inventory levels throughout 2005. If end of year inventory turnover was increased to 12 through more efficient relationships with suppliers, how much cash would be freed up (pick closest number)

Answer 1

the cash that should be freed up is $267

Step-by-step explanation:

The computation of the cash that would be freed up is shown below:

As we know that

The inventory turnover is

= Cost of goods sold ÷ average inventory

12 = $14,800 ÷ average inventory

So, the average inventory is 1,233

Now the cash that should be freed up is

= 1,500 - 1,233

= $267

hence, the cash that should be freed up is $267