Vance Motors Has Current Assets of $1

question 27

Multiple Choice

Vance Motors has current assets of $1.2 million. The company's current ratio is 1.2, its quick ratio is 0.7, and its inventory turnover ratio is 4. The company would like to increase its inventory turnover ratio to the industry average, which is 5, without reducing its sales. Any reductions in inventory will be used to reduce the company's current liabilities. What will be the company's current ratio, assuming that it is successful in improving its inventory turnover ratio to 5?

• A) 1.33
• B) 1.67
• C) 1.22
• D) 0.75
• E) 2.26

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