Johnson Corp. had the following financial results for the fiscal 2004 year: Current ratio 2.00 Quick ratio 1.25 Current liabilities $100,000 Inventory turnover 12 Gross profit % 25 The only current assets are cash, accounts receivable, and inventory. The balance in these accounts has remained constant throughout the year. Johnson’s net sales for 2004 were: A) $300,000. B) $900,000. C) $1,000,000. D) $1,200,000.
Is it B? Inventory turnover = 12, Sales/Inventory = 12 => Sales=12* Inventory CA/CL=2 =>CA=2*100,000=200,000 (CA-Inventory)/CL=1.25=> Inventory = CA-1.25CL=0.75CL=0.75*100,000=75,000 Sales= 12*75,000=900,000
It is not. Map, on a good note, I got in touch with Amber. She ran a 5k this morning while being due to deliver on 12/16!!! She is a trooper to say the least! This question is from Schweser Advanced Q bank questions.
OMG! 5k with less than 1 month to go? amazing:)
D
Yup, can you show us how?
CA(cash, accounts receivable, and inventory) = 200,000 cash, accounts receivable = 125,000 So, Inv = 75000 inv turnover = 12 so, cogs = 900,000 gross margin = 0.25 so, sales = 900,000/0.75 = 1200,000
D, I like this one In a Du Pont analysis think it all the way through sort of way The difference between Current and Quick ratio is inventory if CL = 100,000 and current ratio =2 then CA = 200,000 using the same logic if quick ratio = 1.25 then cash and accounts recievable = 125,000 therefore inventory = 75,000 Inventory turnover = COGS / Inventory therefore COGS = 900,000 from the gross profit = 0.25 therefore gross margin = 0.75 gross margin = COGS / SALES therefore sales = COGS / Gross margin therefore Sales = 1,200,000
i got D , hurrah
Good Q ditchdigger, keep 'em coming!
i say D too.
from the gross profit = 0.25 therefore gross margin = 0.75 -> How do you get this from Gross Profit ? Is Gross Margin = 1 - Gross Profit ?
cavil Wrote: ------------------------------------------------------- > from the gross profit = 0.25 > > therefore gross margin = 0.75 -> How do you get > this from Gross Profit ? > > Is Gross Margin = 1 - Gross Profit ? Sales - COGS = gross profit(or margin) gross profit(or margin) = 0.25 so, COGS (900,000) must be 0.75 now, sales = 900,000/0.75 = 1200,000
current= CA/CL CA=current*CL=2*100,000=200,000 quick=(CA-inventory)/CL inventory=CA-quick*CL=200,000-1.25*100,000=75,000 inventory turnover=COGS/inventory COGS=inventory turnover*inventory=12*75,000=900,000 gross profit %=(sales-COGS)/sales=1-COGS/sales COGS/sales=1-gross profit margin =1-.25=.75 sales=COGS/.75=900,000/.75=1,200,000 Agree! This would be hard to do in 1.5 minutes
Thanks, bunky!