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A Co expects sales revenue of $20million for the coming year. It also aims to achieve the following ratios, current ratio of 2:5:1, sales revenue to current assets of 4:1, and acid test ratio of 2:1.
Based on this, what will be the forecast inventory?
How do i go about doing the following question above ? The answer given is $1m.
You know the ratio of sales revenue to current assets, and so you can calculate the current assets.
You know the current ratio, and so you can then calculate the current liabilities.
You know the quick ratio, so you can then calculate the current assets less inventories.Now all you need to do is look at the different between current assets and current assets without inventories, and you have the figure you need 🙂
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