Question

Taft Technologies has the following relationships: annual sales $1,200,000 current liabilities $375,000 days sales outstanding(DSO)(360-day year) 40 Inventory Turnover Ratio 4.8 current ratio 1.2 The company's current assets consist of cash, inventories, and accounts receivable. How much cash does Taft have on its balance sheet, knowing also that the company's Cost of Goods Sold (including Depreciation) is 960,000 ? A. -$ 8,333 B. $ 116,667 C. $125,000 D. $200,000 E. $316,667

Answer 1

Total Current assets = Current liabiities *Current ratio
		375000*1.20 = 450000
Accounts recievable = DSO *Salles / 360
		40 * 1200000/360 = 133,333
Inventory = Cost of goods sold / Inventory turnover
		960000/4.8 = 200000
Cash = Total current assets - Accounts rececivable -Inventory
	450000-133333-200000 = 116,667
Answer is B. 116,667