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Comprehensive Ratio Calculations The Kretovich Company had a quick ratio of 1.5, a current ratio of...

Comprehensive Ratio Calculations

The Kretovich Company had a quick ratio of 1.5, a current ratio of 2.5, a day's sales outstanding of 32.0 days (based on a 365-day year), total current assets of $510,000, and cash and marketable securities of $110,000.

What were Kretovich's annual sales? Round your answer to the nearest cent. $

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Answer #1

Current ratio = current assets / current liabilities

2.5 = 510,000 / current liabilities

Current liabilities = 204,000

Quick ratio = (Cash + marketable securities + accounts receivables) / current liabilities

1.5 = (110,000 + accounts receivables) / 204,000

306,000 = 110,000 + accounts receivables

Accounts receivables = 196,000

day's sales outstanding = 365 / receivables turnover

receivables turnover = 365 / 32

receivables turnover = 11.40625

Receivables turnover = Sales / accounts receivables

Sales = Receivables turnover * accounts receivables

Sales = 11.40625 * 196,000

Sales = 2,235,625.0

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