Question: You are the Chief Financial Officer for the Williams Department Store Chain. Williams is a family-owned department store chain that has always prided itself on having a wide variety of goods on hand for its customers. Mr. Williams, the chain's founder, takes great pride in having a high level of inventory. He brags that he always has what the customers need as evidenced by the merchandise inventory "on-the-books" just waiting for a customer to buy.

Your analysis of the firm's sales and merchandise inventory relationship reveals the following:

a)annual sales are $100 million

b)average annual inventory is $ 20 million

c)the cost of carrying inventory is 25% of every dollar of inventory

d)30% of the chain's inventory supports 4% of totals sales

e)the cost of goods sold (including inventory carrying cost) is 50% of every sales dollar

f)net income after tax is 5% of every sales dollar

Prepare an executive summary for Mr. Williams addressing the adjustments that should be made to the Chain's current merchandise inventory policy. "Old Man" Williams has a good business sense and takes great pride in the Chain's bottom line.