Thomas Corp. has the following simplified balance sheet: Cash &

Thomas Corp. has the following simplified balance sheet:

Cash $ 50,000 Current liabilities $125,000

Inventory 150,000

Accounts receivable 100,000 Long-term debt 175,000

Net fixed assets 200,000 Common equity 200,000

Total $500,000 Total $500,000

Cost of sales for the year totaled $600,000 and its gross profit is $200,000. The company president believes the company carries excess inventory. She would like the inventory turnover ratio to be 6 times and would use the cash that we free up from reducing the inventory to meet the targeted inventory turnover to reduce current liabilities. If the company follows the president's recommendation and sales remain the same, what would current ratio be?

Expert Solution

jeff jeffy answered 2 years ago

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