Sandra: We are beginning our audit of Imex and have prepared ratio analysis to determine if there have been significant changes in financial position. This helps us guide the audit process. This analysis indicates that the inventory turnover has decreased from 5 to 2.8, while the accounts receivable turnover has decreased from 12 to 8. I was wondering if you could explain this change in operations.
Travis: There is little need for concern. The inventory represents computers that were unable to sell during the holiday buying season. We are confident, however, that we will be able to sell these computers as we move into the next fiscal year.
Sandra: What gives you this confidence?
Travis: We will increase our advertising and provide some very attractive price concessions to move these machines. We have no choice. Newer technology is already out there, and we have to unload this inventory