Question

Holliman Corp. has current liabilities of $426,000, a quick ratio of 1.60, inventory turnover of 3.90, and a current ratio of 4.00. What is the cost of goods sold for the company?

Answer 1

Given data:

Current liabilities: $426,000

Quick ratio: 1.60; Inventory turnover ratio: 3.90; Current Ratio of 4.00;

Based on above, the below steps:

Current Assets = Current Ratio * Current Liabilities = 426000 * 4.00 = $ 1704000

Quick Assets = Quick Ratio * Current Liabilities = 426000 * 1.60 = $ 681600

Inventory = Current Assets - Quick Assets = $ 1704000 - $ 681600 = $ 1022400

COGS = (Average) Inventory * Inventory Turnover Ratio = 1022400 * 3.90 = $ 3987360