A Firm Is Planning to Increase Its Inventory Turnover by 1.5

Essay

A firm is planning to increase its inventory turnover by 1.5 turns next year. This year's inventory is $40M on revenues of $850M. Revenues are planned to grow at 10% next year. The firm's cost ratio (COGS as a percent of sales)is 40%, and is not expected to change in the near future. Calculate the inventory figure that should be included in next year's plan. Calculate using the cost of goods sold (COGS)formulation of inventory turnover and using year-end balances only.