Asset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has investe

Question

2 months ago

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Asset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has investe

d 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:
Walker Telecommunications has a quick ratio of 2.00x, $35,550 in cash, $19,750 in accounts receivable, some inventory, total current assets of $79,000, and total current liabilities of $27,650. The company reported annual sales of $200,000 in the most recent annual report.
Over the past year, how often did Walker Telecommunications sell and replace its inventory?
a. 8.01 x
b. 5.24 x
c. 2.85 x
d. 4.75x

Business

1 answer:

marusya05 [3.7K] · Answer 1 · 2026-04-09T01:44:25+03:00

Answer:

Option A 8.01x is the closest answer

Explanation:

Quick ratio = current assets - inventory / current liabilities

Let x denote the inventory amount

Quick ratio equals 2.00

Current assets amount to $79,000

Current liabilities equate to $27,650

2.00=$79,000-x/$27650

2.00*$27,650=$79,000-x

$55,300=$79,000-x

x=$79,000-$55,300

x= $23,700.00

Inventory turnover = sales/inventory

Sales total $200,000

Inventory valued at $23,700

Inventory turnover ratio=$200,000/$23,700=8.44

Thus, the nearest option is A.