Principles of Corporate Finance

Inventories & Cash Balances

Value of bills sold = Q =

2 x annual cash disbursement x cost per sale

interest rate

2 x 1260 x 20

.08

0 Weeks

25

12.5

balance ($000)

Cash

Average

inventory

=

= 25

1 2 3 4 5

(Everyman’s Bookstore)