2007-07-24 14:00:20 · 5 answers · asked by Anonymous in Business & Finance ➔ Corporations
First of all you need to sell the inventory for more than you bought it so that every time you turn over the inventory, you make a profit. If you therefore increase the inventory turnovers you are increasing the profits and the positive cash flows and therefore you have more money to pay off your debts and don't need to borrow as much.
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Hope this clarifies it.
2007-07-24 14:40:14 · answer #1 · answered by Anonymous · 4⤊ 0⤋
That would be quite true, assuming that the cost of the inventory does not increase due to changes in purchasing volumes in order to cause the inventory turnover rate to increase.
2007-07-24 21:04:33 · answer #2 · answered by acermill 7 · 0⤊ 0⤋
Yes, of course. If your inventory turnover is increased you are SELLING more and faster. SELLING more means more cash - which gives you the ability to pay off debt.
2007-07-24 21:05:07 · answer #3 · answered by alanawear 2 · 0⤊ 0⤋
True, reducing the amount of working capital (inventory) may reduce some cash need.
2007-07-24 23:13:01 · answer #4 · answered by CC 7 · 0⤊ 0⤋
true that is why more companies are going to just in time inventory.
2007-07-24 21:05:48 · answer #5 · answered by mister ed 7 · 0⤊ 0⤋