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12 October, 18:48

Asset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has invested in a particular type of asset (or group of assets) to the amount of revenues the asset is generating. Examples of asset management ratios include the average collection period (also called the days sales outstanding ratio), the inventory turnover ratio, the fixed asset turnover ratio, and the total asset turnover ratio.

Consider the following case:

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 sales of $200,000 in the most recent annual report.

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

a. 8.01 x

b. 5.24 x

c. 2.85 x

d. 4.75x

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Answers (1)
  1. 12 October, 22:19
    0
    Option A 8.01x is the closest answer

    Explanation:

    Quick ratio = current assets-inventory/current liabilities

    let x represent the value of inventory

    quick ratio is 2.00

    current assets is $79,000

    current liabilities is $27,650

    2.00=$79,000-x/$27650

    2.00*$27,650=$79,000-x

    $55,300=$79,000-x

    x=$79,000-$55,300

    x = $23,700.00

    Inventory turnover = sales/inventory

    sales is $200,000

    Inventory value is $23,700

    inventory turnover ratio=$200,000/$23,700=8.44

    The closest option is A,
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