Reducing inventory purchases will increase the company’s cash holdings in the short run, thus reducing the amount of financing or the target cash balance needed. In the long run, the company is likely to reduce its cash holdings in order to increase its EVA. SKI can use the “excess cash” to make investments in more productive assets such as plant and equipment. Alternatively, the firm can distribute the “excess cash” to its shareholders through higher dividends or repurchasing its shares.