1. The Dullpore Corp. instituted a just-in-time inventory program so that the am

Question

1. The Dullpore Corp. instituted a just-in-time inventory program so that the amount of inventory that they hold at any one time is greatly reduced. Did Dullpore decrease or increase its liquidity? Explain. Would the current ratio for Dullpore decrease or increase? (assume that when Dullpore freed up cash it was paid out as dividends to shareholders.) Explain. Does this change indicate that liquidity has increased or decreased? Would the cash cycle increase or decrease? Explain. Does this change indicate that liquidity has increased or decreased? If Dullpore increases its line of credit, would liquidity increase or decrease? Explain. What should happen to Dullpore

Explanation / Answer

It decreases the cash flow as it is the amount the customers owe but not pay off.

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