*Copyright © 2015 by McGraw Hill Education (India) Private Limited
Chapter 4 : Analysis of Financial Statements
1.
The financial ratios of a firm are as follows.
Current ratio
=
1.25
Acid-test ratio
=
1.10
Current liabilities
=
2000
Inventory turnover ratio
=
10
What is the sales of the firm? a. b. c. d. e.
4,000 5,000 3,500 3,000 None of the above
Working:
Current assets = Current liabilities x Current ratio =
2000
x
1.25
=
2500
Current assets - Inventories = Current liabilities x Acid test ratio =
Inventories
=
Sales
=
x
300
Inventories x Inventory turnover ratio =
1
2000
300
Chandra: Financial Management, 9e
x
10
=
3000
1.10 = 2200