Asked by Keijenea labostrie on Jun 19, 2024
Verified
Find the sales of the Sharkton Company using the following information:
Current ratio 2.0
Quick ratio 1.6
Current liabilities $200,000
Inventory turnover based on COGS 8.0
Gross margin % 10%
Inventory Turnover
A ratio showing how many times a company's inventory is sold and replaced over a period, indicating the efficiency of inventory management.
Gross Margin
A financial metric indicating the difference between revenue and the cost of goods sold (COGS), expressed as a percentage of revenue, highlighting the efficiency of a company in managing production costs relative to sales.
- Comprehend the principle of liquidity and its assessment using ratios.
- Comprehend the importance of profit, cash flows, and asset management in determining a company's financial well-being.
- Understand the connection between sales, inventory levels, and financial indicators.
Verified Answer
TO
timii odunfaJun 22, 2024
Final Answer :
Current assets = 2.0(200,000) = $400,000
Current assets minus inventory = 1.6(200,000) = $320,000
Inventory = 400,000 - 320,000 = $80,000
Inventory Turnover = COGS / Inventory = 8.0
COGS / $80,000 = 8.0 => COGS = $640,000
GM % = (Sales - COGS) / Sales = (Sales - $640,000) / Sales = 0.1
0.9 × Sales = $640,000
Sales = $711,111
Current assets minus inventory = 1.6(200,000) = $320,000
Inventory = 400,000 - 320,000 = $80,000
Inventory Turnover = COGS / Inventory = 8.0
COGS / $80,000 = 8.0 => COGS = $640,000
GM % = (Sales - COGS) / Sales = (Sales - $640,000) / Sales = 0.1
0.9 × Sales = $640,000
Sales = $711,111
Learning Objectives
- Comprehend the principle of liquidity and its assessment using ratios.
- Comprehend the importance of profit, cash flows, and asset management in determining a company's financial well-being.
- Understand the connection between sales, inventory levels, and financial indicators.