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15 March, 10:26

Industrialization Automation Company (IAC) has a quick ratio of 2.00; $24,750 in cash; $13,750 in accounts receivable; some inventory; total current assets of $55,000; and total current liabilities of $19,250. In its most recent annual report, IAC reported annual sales of $100,000 and a cost of goods sold equal to 65% of annual sales. How many times is Industrialization Automation Company (IAC) selling and replacing its inventory?

A. 0.35x

B. 30.30x

C. 19.70x

D. 21.67x

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  1. 15 March, 10:53
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    The answer is 3.94x. There is no choice given is the correct choice.

    Explanation:

    We have Inventory turnover time = Cost of goods sold / Inventory balance. Thus, we need to find Cost of good sold and inventory balance as below:

    Inventory balance = Current asset - cash balance - account receivable balance = 55,000 - 24,750 - 13,750 = $16,500.

    Cost of goods sold = Annual sales x % of cost of goods sold over sales = 100,000 x 65% = $65,000.

    Inventory turnover time = Cost of goods sold / Inventory = 65,000 / 16,500 = 3.94x

    The answer is 3.94x. Thus, there is no correct answer in the multiple choice given out.
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