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26 June, 20:30

General Forge and Foundry Company has a quick ratio of 2.00; $38,250 in cash; $21,250 in accounts receivable; some inventory; total current assets of $85,000; and total current liabilities of $29,750. In its most recent annual report, General Forge reported annual sales of $100,000 and the cost of goods sold equal to 65% of annual sales. How many times is General Forge and Foundry Company selling and replacing its inventory?

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  1. 26 June, 20:55
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    The answer is General Forge and Foundry Company selling and replacing its inventory 2.55 times per year on average.

    Explanation:

    We have:

    The company cost of good sold = Sales x 65% = 100,000 x 65% = $65,000

    The company inventory = Total current asset - Cash - Account Receivable = 85,000 - 38,250 - 21,250 = $25,500

    => Inventory turn over ratio = Cost of good sold / Inventory = 65,000/25,500 = 2.55 times or the company is selling and replacing its inventory 2.55 times per year.

    So, the answer is 2.55 times.
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