Question

Monroe manufacturing has a quick ratio of 2.00x $31,000 in cash $17,500 in accounts recivable some inventory total current assets of $70,000 and total current liabilities of $24,500 the company reported annaul sales of $400,000 in the most recent annual reportOver the past year how often did Monroe manufacturing sell and replace its inventory?A) 19.05B) 20.96C) 2.86D) 8.01The inventory turnover rate across companies in the manufacting company in the manufacturing industry is 16.19x based on this info which of the following is true1) Monroe manufacturing is holding less inventory per dollar of sales compared to the industry average2)Monroe manufacturing is holding more inventory per dollar of sales compared to the Industry average

Answer 1

Answer:

The correct option is A as inventory turnover is 19.05

Since the manufacturing industry average is 16.19X ,Monroe manufacturing is holding less inventory per dollar compared to the industry average

Explanation:

The inventory value for Monroe Manufacturing is not known,but can calculated using quick ratio

Quick ratio =(current assets-inventory)/current liabilities

Quick ratio=2

Current assets=$70000

Current liabilities=$24500

2=($70000-inventory)/$24500

By cross multiplying we have

2*24500=$70000-inventory

49000=$70000-inventory

Inventory =70000-49000

inventory=21000

In determining how often Monroe sells and replaces inventory, we use inventory turnover ratio

Inventory ratio=sales/inventory

Sales=$400000

inventory turnover=400000/21000

Inventory turnover=19.05