Crockett Electronics has a quick ratio of 2.00x, $25,425 in cash, $14,125 in acc
ID: 2536318 • Letter: C
Question
Crockett Electronics has a quick ratio of 2.00x, $25,425 in cash, $14,125 in accounts receivable, some inventory, total current assets of $56,500, and total current liabilities of $19,775. The company reported annual sales of $700,000 in the most recent annual report. Over the past year, how often did Crockett Electronics sell and replace its inventory? 41.30x O 2.86 x O 45.43 x 8.01 x The inventory turnover ratio across companies in the electronics industry is 45.43X. Based on this information, which of the following statements is true for Crockett Electronics? OCrockett Electronics is holding more inventory per dollar of sales compared to the industry average Crockett Electronics is holding less inventory per dollar of sales compared to the industry average.Explanation / Answer
Solution 1a:
Total current Liabilities = $19,775
Quick ratio = 2
Quick assets = Current liabilities * Quick ratio = $19,775 *2 = $39,550
Total currrent assets =$56,500
Inventory = Current assets - Quick assets = $56,500 - $39,550 = $16,950
Annual sales = $700,000
Crockett Electronics sell and replace its inventory = Sales / Inventory = $700,000 / $16,950 = 41.30 times
Hence first option is correct.
Solution 1b:
If industry turnover ratio across company in electronics industry is 45.43x, it means Crockett electronics is holding more inventory per dollar of sales compared to the industry average.
Hence first statment is true.
Note: As multiple questions are posted, i have answered first question completely with all parts. Hence kindly post separate question for answer of remaining questions.
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