Mandesa, Inc., has current liabilities of $8 million, current ratio of 2 times,

Question

Mandesa, Inc., has current liabilities of $8 million, current ratio of 2 times, inventory turnover of 12 times, average collection period of 30 days, and credit sales of $64 million.

Calculate the value of cash and marketable securities. (Use 365 days a year. Round your intermediate calculations and final answer to the nearest dollar amount.)

Calculate the value of cash and marketable securities. (Use 365 days a year. Round your intermediate calculations and final answer to the nearest dollar amount.)

Explanation / Answer

Current ratio = 2 times = Current assets / $8m => Current assets = 2 x $8m. = $16million

Inventory turnover ratio = 12 times = $64m./ Inventory => Inventory = $64m./12 = $5,333,333

Average collection period (ACP) = 30 days = Accounts receivable x 365 / $64m.

=> Accounts receivable = 30 x $64m./365 = $5,260,273

=> Cash and marketable securities = $16m. - $5,333,333 - $5,260,273 = $5,406,394

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.