Answer:
Explanation:
To find the inventory turnover for Roselli's Machine Manufacturing Co, we need to use the formula:
Inventory turnover = Cost of goods sold / Average inventory
First, we need to find the cost of goods sold (COGS):
COGS = Sales - Gross profit
COGS = R120 000 - R50 000
COGS = R70 000
Next, we need to find the average inventory. We can use the quick ratio formula to find the current assets:
Quick ratio = (Current assets - Inventory) / Current liabilities
Rearranging the formula to solve for inventory, we get:
Inventory = Current assets - (Quick ratio x Current liabilities)
Plugging in the values we know, we get:
1.75 = (Current assets - Inventory) / R25 000
Current assets - Inventory = 1.75 x R25 000
Current assets - Inventory = R43 750
Inventory = Current assets - R43 750
Since the current ratio is 2.5, we know that:
Current assets / Current liabilities = 2.5
Solving for current assets, we get:
Current assets = 2.5 x R25 000
Current assets = R62 500
Substituting the values we found for inventory and COGS into the inventory turnover formula, we get:
Inventory turnover = COGS / Average inventory
Inventory turnover = R70 000 / [(R62 500 - R43 750) / 2]
Inventory turnover = R70 000 / (R18 750 / 2)
Inventory turnover = R70 000 / R9 375
Inventory turnover = 7.47
Therefore, the inventory turnover for Roselli's Machine Manufacturing Co is 7.47.