Question

Liquidity Ratios Burt's TVs has current liabilities of $25.3 million. Cash makes up 43 percent of the current assets and accounts receivable makes up another 23 percent of current assets. Burt's current ratio = .95 times. What is the value of inventory listed on the firm's balance sheet?

Answer 1

Inventory is $8.17 million

Step-by-step explanation:

The starting in computing the value of inventory listed on the firm's balance sheet is solving for current asset using the current ratio as highlighted below:

Current ratio=current assets/current liabilities

Current ratio is 0.95 times

current liabilities is $25.3 million

current assets is unknown

0.95=current assets/25.3

current assets =0.95*25.3

=$24.04 million

However the value of inventory is calculated thus:

inventory=(100%-cash-receivables)*current assets

inventory=(100%-43%--23%)*$24.04

inventory =34%*$24.04

=$8.17 million

Answer 2

Inventory = $8.17190

Step-by-step explanation:

First compute the total current assets:

Current Ratio = Current Assets

Current Liabilities

0.95 = Current Assets

25.3

Current Assets = 25.3 * 0.95

Current Assets = 24.035

Now,

Current Assets = 100%

Less: Cash = (43%)

Account Receivable = (23%)

Inventory = 34%

Now,

Inventory = Current Assets * Inventory%

Inventory = 24.035 * 34%

Inventory = $8.1719