Assignment 04-Analysis of Financial Statements Activity Information Due on Dec 1
ID: 2805762 • Letter: A
Question
Assignment 04-Analysis of Financial Statements Activity Information Due on Dec 18 at 11:59 PM PST Back to Assignment Attempts:5 6 3. Asset management ratios Keep the Highest: 6/9 Aa Aa 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 Monroe Manufacturing has a quick ratio of 2.00x, $28,800 in cash, $16,000 in accounts receivable, some inventory, total current assets of $64,000, and total current liabilities of $22,400. The company reported annual sales of $700,000 in the most recent annual report. Over the past year, how often did Monroe Manufacturing sell and replace its inventory? 40.11 x O 36.46 x O 8.01 x O 2.86 xExplanation / Answer
Answer a.
Quick Ratio = 2.00x
Current Assets = $64,000
Current Liabilities = $22,400
Annual Sales = $700,000
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
2 = ($64,000 - Inventory) / $22,400
$44,800 = $64,000 - Inventory
Inventory = $19,200
Inventory Turnover = Annual Sales / Inventory
Inventory Turnover = $700,000 / $19,200
Inventory Turnover = 36.46 x
Answer b.
Monroe Manufacturing is holding less inventory per dollar of sales compared to the industry average.