Question

A firm has sales of $1,030, net income of $207, net fixed assets of $506, and current assets of $262. The firm has $82 in inventory. What is the common-size balance sheet value of inventory?

Answer 1

To find the common-size balance sheet value of inventory, the inventory value of $82 is divided by the total assets of $768 and the result is multiplied by 100, giving a value of approximately 10.68%.

Step-by-step explanation:

To calculate the common-size balance sheet value of inventory for the firm, we need to express the inventory value as a percentage of total assets. The total assets of the firm are the sum of its net fixed assets and current assets. Using the information provided, the total assets would be $506 (net fixed assets) + $262 (current assets) = $768. The inventory is valued at $82. The common-size percentage is calculated as:
(Inventory / Total Assets) × 100 = ($82 / $768) × 100.

Therefore, the common-size balance sheet value of inventory is approximately:
(82 / 768) × 100 ≈ 10.68%.