Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 28, Problem 10CQ
Inventory Period At least part of Dell’s corporate profits can be traced to its inventory management. Using just-in-time inventory, Dell typically maintains an inventory of three to four days’ sales. Competitors such as Hewlett-Packard and IBM have attempted to match Dell’s inventory policies, but lag far behind. In an industry where the price of PC components continues to decline, Dell clearly has a competitive advantage. Why would you say that it is to Dell’s advantage to have such a short inventory period? If doing this is valuable, why don’t all other PC manufacturers switch to Dell’s approach?
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Students have asked these similar questions
answer these question in just two sentences.
a..“If a firm sold some inventory on credit, its current ratio would probably not change much, but its quick ratio would increase.” If it is possible give reason in two sentences.
b. In general, it's better to have a low inventory turnover ratio than a high one, as a low ratio indicates that the firm has an adequate stock of inventory relative to sales and thus will not lose sales as a result of running out of stock. If it is false give reason in two sentences.
c. “It is appropriate to use the fixed assets turnover ratio to appraise firms' effectiveness in managing their fixed assets if and only if all the firms being compared have the same proportion of fixed assets to total assets.”
If you are not agreed with this statement give justification in two sentences.
Bob's Inc has the following balance sheet and income statement data
see image...
The new CFO thinks that inventory are excessive and could be lowered to cause the current ratio to equal industry average 3.00 w/o affecting either sales or net income. assuming that inventories are sold off and not replaced to get the current ratio to the target level and that the funds generated are used to buy back common stock at book value, by how much would the ROE change?
Required information
[The following information applies to the questions displayed below.]
BookWeb, Incorporated, sells books and software over the Internet. A recent article in a trade journal has caught the
attention of management because the company has experienced soaring inventory handling costs. The article notes that
similar firms have purchasing, warehousing, and distribution costs that average 13 percent of sales. Thirteen percent is
attractive to BookWeb management when compared to its results for the past year, shown in the following table:
Activity (cost)
Cost Driver
Cost Driver % of Cost Driver % of Cost Driver
Quantity
Incoming receipts ($300,000)
Warehousing ($360,000)
Shipments ($225,000)
Number of purchase orders
Number of inventory moves
Number of shipments
2,000
9,000
for Books
70%
80%
for Software
30%
20%
15,000
25%
75%
Book sales revenue totaled $3,900,000 and software sales revenue totaled $2,600,000. A review of the company's
activities found various…
Chapter 28 Solutions
Corporate Finance
Ch. 28 - Prob. 1CQCh. 28 - Trade Credit forms In what form is trade credit...Ch. 28 - Prob. 3CQCh. 28 - Five Cs or Credit What arc the five Cs of credit?...Ch. 28 - Credit Period Length What are some of the factors...Ch. 28 - Credit Period Length In each of the following...Ch. 28 - Inventory Types What are the different inventory...Ch. 28 - Just-in-Time Inventory If a company moves to a JIT...Ch. 28 - Inventory Costs If a companys inventory carrying...Ch. 28 - Inventory Period At least part of Dells corporate...
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