Use the following information to calculate current assets: sales = $100 million, capital intensity ratio = 0.5 times, debt ratio = 30 percent, and fixed asset turnover ratio = 5 times.
A) $10m
B) $15m
C) $30m
D) $50m

Question

Quizplus · Accepted Answer

The capital intensity ratio is the inverse of the total asset turnover ratio. Given a capital intensity ratio of 0.5, the total assets are $100m * 0.5 = $50m. The fixed asset turnover ratio is 5, so fixed assets are $100m / 5 = $20m. Therefore, current assets = total assets - fixed assets = $50m - $20m = $30m.

Use the Following Information to Calculate Current Assets: Sales =