A Firm Reports a Current Ratio of 2 and a Quick

question 35

Multiple Choice

A firm reports a current ratio of 2 and a quick ratio of 1.2.The firm has total current assets of $4,000.If the firm reports cost of goods sold at $25,000 for the given year,what is the average age of their inventory?

• A) 12.35 days
• B) 15.63 days
• C) 18.24 days
• D) 23.36 days

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Definitions:

Accounts Receivable

Money owed to a business by its clients for goods or services that have been delivered or sold but not yet paid for.

Cash Amount

The total value of cash on hand or in bank accounts, easily accessible for immediate use by the business.

Cost of Merchandise Sold

The direct costs attributable to the goods sold by a company, including purchase price, freight, storage, and packaging.

Inventories

Assets held for sale in the ordinary course of business, or in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process.