Question

The Kretovich Company had a quick ratio of 0.9, a current ratio of 3.0, a days'...

The Kretovich Company had a quick ratio of 0.9, a current ratio of 3.0, a days' sales outstanding of 36.5 days (based on a 365-day year), total current assets of $900,000, and cash and marketable securities of $125,000. What were Kretovich's annual sales? Do not round intermediate calculations. Round your answer to the nearest dollar.

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Answer #1

Given,

Current assets= $900,000,

Cash and marketable securities = $125,000

Current Ratio= 3, Quick Ratio= 0.9,

Days sales outstanding= 36.5 days.

Therefore,

Current Liabilities = Current Assets/ Current Ratio= 900000/3 = $300,000

Quick assets= Current Liabilities*Quick Ratio = $300,000*0.9 = $270,000

Receivables= Quick assets - Cash & marketable securities = $270,000- $125,000 = $245,000

Number of days sales outstanding= Receivables/(Sales/365)

Substituting the values,

36.5= 245000/(Sales/365)

Sales= (245000/36.5)*365 = $2,450,000

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