Question

General Forge and Foundry Company has a quick ratio of 2.00; $38,250 in cash; $21,250 in accounts receivable; some inventory; total current assets of $85,000; and total current liabilities of $29,750. In its most recent annual report, General Forge reported annual sales of $100,000 and the cost of goods sold equal to 65% of annual sales. How many times is General Forge and Foundry Company selling and replacing its inventory?

Answer 1

Answer:

The answer is General Forge and Foundry Company selling and replacing its inventory 2.55 times per year on average.

Explanation:

We have:

The company cost of good sold = Sales x 65% = 100,000 x 65% = $65,000

The company inventory = Total current asset - Cash - Account Receivable = 85,000 - 38,250 - 21,250 = $25,500

=> Inventory turn over ratio = Cost of good sold / Inventory = 65,000/25,500 = 2.55 times or the company is selling and replacing its inventory 2.55 times per year.

So, the answer is 2.55 times.