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29 January, 02:45

Liquidity Ratios Burt's TVs has current liabilities of $25.3 million. Cash makes up 43 percent of the current assets and accounts receivable makes up another 23 percent of current assets. Burt's current ratio =.95 times. What is the value of inventory listed on the firm's balance sheet?

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Answers (2)
  1. 29 January, 04:59
    0
    Inventory = $8.17190

    Explanation:

    First compute the total current assets:

    Current Ratio = Current Assets

    Current Liabilities

    0.95 = Current Assets

    25.3

    Current Assets = 25.3 * 0.95

    Current Assets = 24.035

    Now,

    Current Assets = 100%

    Less: Cash = (43%)

    Account Receivable = (23%)

    Inventory = 34%

    Now,

    Inventory = Current Assets * Inventory%

    Inventory = 24.035 * 34%

    Inventory = $8.1719
  2. 29 January, 06:00
    0
    Inventory is $8.17 million

    Explanation:

    The starting in computing the value of inventory listed on the firm's balance sheet is solving for current asset using the current ratio as highlighted below:

    Current ratio=current assets/current liabilities

    Current ratio is 0.95 times

    current liabilities is $25.3 million

    current assets is unknown

    0.95=current assets/25.3

    current assets = 0.95*25.3

    =$24.04 million

    However the value of inventory is calculated thus:

    inventory = (100%-cash-receivables) * current assets

    inventory = (100%-43%--23%) * $24.04

    inventory = 34%*$24.04

    =$8.17 million
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