Oasis Products, Inc. has current liabilities = $10 million, current ratio = 1.5 times, inventory turnover ratio = 12 times, average collection period = 20 days, and sales = $100 million. What is the value of their cash and marketable securities?
A) $1,187,215
B) $8,333,333
C) $15,000,000
D) $17,146,188

Question

Quizplus · Accepted Answer

To find cash and marketable securities, first calculate current assets using the current ratio: Current Assets = Current Liabilities * Current Ratio = $10 million * 1.5 = $15 million. Then, calculate inventory using the inventory turnover ratio: Inventory = Sales / Inventory Turnover = $100 million / 12 = $8.333 million. Calculate accounts receivable using the average collection period: Accounts Receivable = (Sales / 365 days) * Average Collection Period = ($100 million / 365) * 20 = $5.479 million. Finally, Cash and Marketable Securities = Current Assets - Inventory - Accounts Receivable = $15 million - $8.333 million - $5.479 million = $1.187 million.