The current ratio of Company X is 3.0 times. Company X has working capital of $2

Question

The current ratio of Company X is 3.0 times. Company X has working capital of $20,000. Total Current Assets for Company X are: 6. A. $6,667 B. $10,000 C. $30,000 D. $60,000 Company X reports $200,000 in sales of Widgets in 2012. The Costs of Goods sold for these Widgets is $90,000. All other operating expenses (SG&A;, R&D;, Depreciation, Other, etc.) are $50,000. Which of the following is the correct representation of the profitability ratios: 7. A. Gross Profit Margin 45%, Operating Margin 30%. B. Gross Profit Margin 55%, Operating Margin 30%. C. Gross Profit Margin 45%, Operating Margin 20%. D. Gross Profit Margin 55%, Operating Margin 20%. Sales for Company Y are $100,000 in 2012 and the net profit margin is 9.0%. The Return on Equity is 20%. What is the dollar value of Equity. 8. A. $ 18,000 B. $ 45,000 C. $ 90,000 D. $ 444,444 9. If the Cost of Sales for Company Z is $912,500 for the 2012 year, and the Days Inventory Held is 25. The value of the Inventory at the end of 2012 is: A. $ 62,500 B. S 36,500 C. $ 3,042 D. $ 2,500

Explanation / Answer

6) C. $ 30,000 Working: Suppose Current Liability is "x" Cuurent Assets = Current Liability*current ratio = x*3 = 3x Now, as per question, Working Capital = Current Assets - Current Liability or, $       20,000 = 3x-x or, $       20,000 = 2x or, x = $           10,000 So, Current Liability is $           10,000 Current Assets $           30,000 7) B. Gross Profit Margin 55%, Operating Margin 30% Working; Sales $       2,00,000 100% Cost of goods sold $           90,000 45% Gross Profit Margin $       1,10,000 55% Operating Expense $           50,000 25% Operating Margin $           60,000 30% 8) B. $ 45,000 Working: Net Income = Sales x net profit margin = $       1,00,000 x 9.0% = $             9,000 Equity = Net Income/Return on Equity = $             9,000 / 20% = $           45,000 9) A. $ 62,500 Working: a. Days Inventory held = Days in a year/Inventory Turnover Ratio 25 = 365/Inventory Turnover Ratio Inventory Turnover Ratio =                 14.60 b. Inventory Turnover Ratio = Cost of goods sold/Ending Inventory                 14.60 = $       9,12,500 / Ending Inventory Ending Inventory = $           62,500

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