A Firm Has the Following Items on Its Balance Sheet $\$ 3,000,000$

question 1

Essay

A firm has the following items on its balance sheet: inventory
$\$ 3,000,000$
accounts receivable $2,300,000$
The inventory tumover for the industry is 4x and the average collection period is 33 days. If this firm's sales are $9,000,000 and the interest rate is 10 percent, how much could it save in carrying costs if its inventory tumover and average collection period were comparable to the industry average? (To answer, assume that last year's inventory equaled this year's inventory.)

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Definitions:

Official Poverty Line

A government-determined income level below which an individual or family is considered to be living in poverty, affecting eligibility for certain public assistance programs.

U.S. Poverty Rate

The proportion of the population in the United States living below the poverty line, as defined by the federal government.

Non-cash Benefits

Forms of compensation provided to employees or beneficiaries that are not paid out in cash, such as health insurance, pensions, and company cars.

Poverty Rate

The percentage of the population whose income falls below the poverty line, indicating the proportion of people living in poverty.