<span>Sales = $12,000,000</span>
<span>
<span>Inventory
Turnover ratio (old) = 3
</span><span>Inventory
Turnover ratio (new) = 7.5
</span><span>Freed up Cash = ?
</span><span>So, let’s find
out the freed up cash
<span>
<span>We know level
of inventory are calculated as follows;</span>
<span>Inventory = Sales Inventory turnover ratio</span>
<span>Calculating $
value of old inventory
<span>
<span>Inventory Old=$12,000.0003
</span>
<span><span> =</span>$7.5,000,000</span>
<span> Calculating $
value of New inventory
<span>
<span>Inventory New=$12,000,0075
</span>
<span><span> =</span>$3,000,000</span>
<span>
<span>The freed up
cash would be=Old Inventory – New Inventory</span>
<span>
<span>=$7.5,000,000 - $3,000,000
</span><span>
=<span>
$4.5,000,000</span></span></span></span></span></span></span></span></span></span></span>
