Green Products, Inc. has current liabilities = $40 million, current ratio = 2.4 times, inventory turnover ratio = 8 times, average collection period = 40 days, and sales = $320 million. What is the value of their cash and marketable securities?
A) $20.93m.
B) $56.00m.
C) $75.07m.
D) $96.00m.

Question

Quizplus · Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. Given a current ratio of 2.4 times and current liabilities of $40 million, the current assets are $96 million (2.4 * $40 million). The inventory turnover ratio is the cost of goods sold divided by the average inventory. Without the cost of goods sold or inventory values, we directly use the given data to find cash and marketable securities. The average collection period and sales data hint at accounts receivable but are not directly needed to calculate cash and marketable securities from the given information. To find the value of cash and marketable securities, subtract the known liabilities and operational assets from the current assets. However, without specific values for inventory or receivables, we focus on the given data: current assets are $96 million, and current liabilities are $40 million. The question directly asks for cash and marketable securities, which are part of current assets, but without further breakdowns of other components (like inventory or receivables), we cannot precisely calculate cash and marketable securities from the provided information. The correct approach involves understanding that the question implicitly requires calculating or deducing the value based on given ratios and totals, but the direct calculation from the provided information leads to recognizing the need for additional data or making assumptions about the distribution of current assets. Given the data provided and typical financial analysis methods, a precise calculation cannot be achieved without making assumptions about the distribution of current assets. Therefore, the initial calculation step involves recognizing the total current assets from the current ratio and current liabilities, which equals $96 million. Further breakdown or precise calculation for cash and marketable securities would require additional specific information about the components of current assets.