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In: Finance

What is the inventory turnover ratio for XYZ Corp. if COGS equals $9,000, current ratio equals 3.0,

What is the inventory turnover ratio for XYZ Corp. if COGS equals $9,000, current ratio equals 3.0, quick ratio equals 1.5, and the firm has $1,800 in current assets?

A. 10 times

B. 10 times

C. 8 times

D. 6 times

Solutions

Expert Solution

The option (b) is right option.

 

Explanation:

Current Ratio = Current Assets / Current Liabilities.

 

Current Liabilities

= Current Assets / Current Ratio

= 1,800 / 3

= $ 600

 

Quick Ratio = (Current Asset - Inventories) / Current Liabilities

1.5 = (1,800-Inventories) / 600

Inventories = 1800 - (1.5 x 600)

                      = $ 900

 

Inventory turnover ratio

= Cost of Goods sold / Inventories

= 9000 / 900

= 10 times

 

Hence, B is correct option.

The option (b) is right option.

Junaid answered 1 year ago
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