Grant Communications is forecasting its financial statements for the upcoming year. Highlights include: Current assets of $6 million Current ratio of 2.0 Sales of $20 million Inventory turnover ratio (Sales/Inventory) of 6 The company's CFO is concerned about the forecasted inventory turnover ratio. Her goal is cut nventory enough to obtain an inventory turnover ratio of X, which is the industry average, while still maintaining sales at $20 million. If the company can accomplish this goal, the cash generated from he cut in inventories will be used to cut accounts payable. This will give the firm a Quick Ratio Current Assets - Inventory) / Current Liabilition of 150

Grant Communications is forecasting its financial statements for the upcoming year. Highlights include: Current assets of $6 million Current ratio of 2.0 Sales of $20 million Inventory turnover ratio (Sales/Inventory) of 6 The company's CFO is concerned about the forecasted inventory turnover ratio. Her goal is cut nventory enough to obtain an inventory turnover ratio of X, which is the industry average, while still maintaining sales at $20 million. If the company can accomplish this goal, the cash generated from he cut in inventories will be used to cut accounts payable. This will give the firm a Quick Ratio Current Assets - Inventory) / Current Liabilition of 150

Name: Grant Communications is forecasting its financial statements for the
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Description: Grant Communications is forecasting its financial statements for the upcoming year. Highlightsinclude:Current assets of $6 millionCurrent ratio of 2.0Sales of $20 millionInventory turnover ratio (Sales/Inventory) of 6The company's CFO is concerned a

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

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Concept explainers

Financial Ratios

A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.

Return on Equity

The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.

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Question

Grant Communications is forecasting its financial statements for the upcoming year. Highlights
include:
Current assets of $6 million
Current ratio of 2.0
Sales of $20 million
Inventory turnover ratio (Sales/Inventory) of 6
The company's CFO is concerned about the forecasted inventory turnover ratio. Her goal is cut
inventory enough to obtain an inventory turnover ratio of X, which is the industry average, while still
maintaining sales at $20 million. If the company can accomplish this goal, the cash generated from
the cut in inventories will be used to cut accounts payable. This will give the firm a Quick Ratio
[(Current Assets - Inventory) / Current Liabilities] of 1.50.
What is X, the desired inventory turnover ratio? Enter your answer, truncated to 2 decimal places.
For example, enter 7.777 as 7.77.

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