Question

Asset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has invested 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: Polk Software Inc. has a quick ratio of 2.00x, $32,850 in cash, $18,250 in accounts receivable, some inventory, total current assets of $73,000, and total current liabilities of $25,550. The company reported annual sales of $100,000 in the most recent annual report. Over the past year, how often did Polk Software Inc. sell and replace its inventory

Answer 1

Over the Past year the Polk Software Inc sold and replaced its inventory at 4.57x(times)

Step-by-step explanation:

Value of inventory = Total current assets - Cash - Account receivable

Value of inventory = 73,000 - 32,850 - 18,250

Value of inventory = $21,900

Inventory turnover ratio = Sales/ Inventory

Inventory turnover ratio= $100,000 / $21,900

Inventory turnover ratio= 4.57 times

Over the Past year the Polk Software Inc sold and replaced its inventory at 4.57x(times)