Walker Telecommunications has a quick ratio of 2.00x, $35,550 in cash, $19,750 in accounts receivable, some inventory, total current assets of $79,000, and total current liabilities of $27,650. The company reported annual cost of goods sold of $200,000 in the most recent annual report.

Required:

a. Over the past year, how often did Walker Telecommunications sell and replace its inventory?

O 9.28x

O 8.01x

O 8.44x

O 2.86x

Question

Business

Hugh Bartlett

26 February, 04:51

Walker Telecommunications has a quick ratio of 2.00x, $35,550 in cash, $19,750 in accounts receivable, some inventory, total current assets of $79,000, and total current liabilities of $27,650. The company reported annual cost of goods sold of $200,000 in the most recent annual report.

Required:

a. Over the past year, how often did Walker Telecommunications sell and replace its inventory?

O 9.28x

O 8.01x

O 8.44x

O 2.86x

+1

Answers (1)

Know the Answer?

Toby Franco · Answer 1

Option C: 8.44 times

Explanation:

Quick ratio (also called as acid test ratio) is the indicator of a company's liquidity position at a very short period which only considers the most liquid assets and ignores Inventory & other assets which cannot be realised immediately.

As we know that Quick Ratio = [Current Assets - Inventory - Prepaid Assets] / Current Liabilities

2.00 = $79,000 - Inventory - 0] / $27,650

=> Inventory = $23,700‬

Inventory turnover ratio gives us the number of times the company sells and replaces its inventory during the period.

Annual Sales = $200,000

Inventory Turnover Ratio = Sales / Average Inventory

=> $200,000 / $23,700 = > 8.44 times