In an economy, firms tend to hold 25% of output as inventory. i. If in period 1, total output is 200 units, calculate the stock of inventory in that period. ii. If production increases by 50% in the following period, calculate inventory investment over the two periods

In an economy, firms tend to hold 25% of output as inventory. i. If in period 1, total output is 200 units, calculate the stock of inventory in that period. ii. If production increases by 50% in the following period, calculate inventory investment over the two periods

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter18: Accounting Periods And Methods

Section: Chapter Questions

Problem 67P

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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

In an economy, firms tend to hold 25% of output as inventory.
i. If in period 1, total output is 200 units, calculate the stock of inventory in
that period.
ii. If production increases by 50% in the following period, calculate inventory
investment over the two periods.

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