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17 September, 03:34

Fairchild Garden Supply expects $700 million of sales this year, and it forecasts a 15% increase for next year. The CFO uses this equation to forecast inventory requirements at different levels of sales: Inventories = $30.2 + 0.25 (Sales). All dollars are in millions. What is the projected inventory turnover ratio for the coming year? a. 3.48 times b. 2.82 times c. 2.78 times d. 4.35 times

A. 2.78 times

B. 2.82 times

C. 4.35 times

D. 3.79 times

E. 3.48 times

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  1. 17 September, 04:03
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    D) 3.48

    Explanation:

    Current Year Sales = $700

    Growth rate = 15%

    Projected Sales=$700*15% + $700

    Which is $805

    Required inventory = $30.2 + 0.25*projected sales

    Req. Inv = $30.2 + 0.25 ($805)

    Req. Inv = $231.45

    Inventory turn over = projected sales/Req. inv

    $805/$231.45

    Inventory turn over = 3.48 times
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