Question

Mandesa, Inc. has current liabilities of $9,500,000, current ratio of 2.0 times, inventory turnover of 12 times, average collection period of 45 days, and credit sales of $65,500,000.
Required:
a. Calculate the value of cash and marketable securities. (Use 365 days a year. Round your intermediate calculations and final answer to the nearest dollar amount.)

Answer 1

Answer:

$5465219

Explanation:

collection/receivables period = 365 / receivables turnover -------1

receivables turnover  = credit sales / receivables----------2

inventory turnover = credit sales / inventory-----------3

current assets = current ratio * current liabilities ------------ 4

cash and marketable security = (Current assets - inventory - receivables)---5

credit sales = $65500000

equation 2

Receivables = credit sales / receivables turnover = $65500000 / 8.11 = $8076448

equation 1

collection/receivable period = 45 = 365 / receivables turnover

hence receivables turnover = 365 / 45 = 8.11

equation 3

12 = 65500000 / inventory

hence inventory = 65500000 / 12 = $5458333

equation 4

current assets =  2 * 9500000 = $19000000

equation 5

cash and marketable security = ( 19000000 - 5458333 -8076448 )

                                                 = $5465219

Answer 2

Answer:

$5,569,634

Explanation:

Current ratio = current assets = 2× $9,500,000= $19,000,000

Inventory turnover = 12 times = $65,000,000÷ 12= $ 5,416,667

Average collection period (APC) = 45 days = account receivable × 365 days

=> Account receivable = (45 × $65,000,000 )÷ 365 days = $8,013,699

=> cash and marketable securities =$ 19,000,000 - $5,416,667- $8,013,699 = $5,569,634