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Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please do not give solution in image format thanku
Transcribed Image Text:2. What is the effect of the projected change in the inventory balance on cash flow from operating activities for the year?
Effect of change in inventory
![Required information
[The following information applies to the questions displayed below.]
Mears and Company has been operating for five years as an electronics component manufacturer specializing in cellular
phone components. During this period, it has experienced rapid growth in sales revenue and in inventory. Mr. Mears and
his associates have hired you as Mears's first corporate controller. You have put into place new purchasing and
manufacturing procedures that are expected to reduce inventories by approximately one-third by year-end. You have
gathered the following data related to the changes:
Inventory
Cost of goods sold
Required:
1. Compute the inventory turnover ratio based on two different assumptions:
Note: Round your answers to 1 decimal place.
(dollars in thousands)
Beginning End of Year
of Year
$601,700
(projected)
$392,310
Current
Year
(projected)
$7,058,984
a. Those presented in the above table (a decrease in the balance in inventory).
b. No change from the beginning-of-the-year inventory balance.
Inventory turnover ratio
Projected
Change
No Change from
Beginning of Year](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffab3cc17-340b-44cf-840a-1255cd02c78f%2F39fe3148-2c29-48e8-8be1-b2540eeb72e6%2Fb3vkqn_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Mears and Company has been operating for five years as an electronics component manufacturer specializing in cellular
phone components. During this period, it has experienced rapid growth in sales revenue and in inventory. Mr. Mears and
his associates have hired you as Mears's first corporate controller. You have put into place new purchasing and
manufacturing procedures that are expected to reduce inventories by approximately one-third by year-end. You have
gathered the following data related to the changes:
Inventory
Cost of goods sold
Required:
1. Compute the inventory turnover ratio based on two different assumptions:
Note: Round your answers to 1 decimal place.
(dollars in thousands)
Beginning End of Year
of Year
$601,700
(projected)
$392,310
Current
Year
(projected)
$7,058,984
a. Those presented in the above table (a decrease in the balance in inventory).
b. No change from the beginning-of-the-year inventory balance.
Inventory turnover ratio
Projected
Change
No Change from
Beginning of Year
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