question archive If Current Ratio is 1
If Current Ratio is 1
Subject:FinancePrice:2.86 Bought7
If Current Ratio is 1.3 and Quick Ratio is 0.9; then the value of inventory is......? The ending balance of current liabilities as disclosed in the balance sheet for XC Itd. is 100.000 USD.
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Answer : Calculation of Inventory Value :
Current Ratio = Crrent assets / Current Liabilities
1.3 = Current Assets / 100000
==> Current Assets = 130000
Quick ratio = Current Assets excluding Inventory / Current liabilities
0.9 = Current Assets excluding Inventory / 100000
==> Current Assets excluding Inventory = 90000
Inventory = 130000 - 90000 = 40000
Days Sales in Inventory = (Inventory / Cost of Goods sold) * 365 days
= (40000 / 395085) * 365 days
= 36.95 days
