Question

Asset management ratios Asset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has invested in a particular type of asset (or group of assets) to the amount of revenues the asset is generating. Examples of asset management ratios include the average collection period (also called the days sales outstanding ratio), the inventory turnover ratio, the fixed asset turnover ratio, and the total asset turnover ratio.
Consider the following case:_______.
Graham Pharmaceuticals has a quick ratio of 2.00x, $31, 500 in cash, $17, 500 in accounts receivable, some assets of inventory, total $70,000, and total abilities of $24, 500. The company reported annual sales of $100,000 in the most recent annual report, over the past year, how often did Graham Pharmaceuticals sell and replace its inventory?
a. 8.01 x
b. 5.24 x
c. 2.85 x
d. 4.75x

Answer 1

Answer:

d. 4.75x

Explanation:

The computation is shown below:

Inventories = Total current assets - (Cash + Account receivable)

= $70,000 - ($31,500 + $17,500)

= $21,000

Now

Inventory turnover ratio = Sales ÷ Inventory

= $100.000 ÷ $21,000

= 4.76

hence, the correct option is d. 4.75x

The same is to be considered

We simply applied the above formula