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) $1,200,000. C) $900,000. D) $1,000,000.
CA/CL = 2 CA = 200,000 Cash + AR / CL = 1.25 CASH + AR= 125000 inventory = 200000-125000 = 75000 inventory turnover = 12 = sales / inventory sales = 12 * 75000 900000 C
Nope, you had it the first part correct, but remember, inventory turnover is COGS/avg inventory take 75,000 which is inventory. 12 = COGS/75,000 calc COGS to be 900,000 now profit margin is (sales-COGS)/sales which is equal to 0.25 Work out the math, get $1,200,000, B
900,000 is COGS not sales
yep i forget that everytime. thanks, good question…