Referring to the following data of the Omani Company, that extracted from the balance sheet at 31 12 2019, answer the following questions: - (Note; Write all Equations regarding the questions) 1. The company manager targets to reduce the current ratio in the year (2020) by 33% from the previous year (2019), this requiring to downsize the amount of the total current asset. To what level can the manager reduce the total current asset to achieve this target at (2020)? (Suppose the oth things are fixed) 2. The manager put a plan to reduce the selling period in the (2020) by (16.7%) from the previous year (2019). Calculate the newinventory tumover (Suppose the other things are fixed) Data of 2019 Total Asset Turnover 2 Times Net Fixed Asset 400 (Thousand OMR) Total Liabilities 400 (Thousand OMR) Sales 2000 (Thousand OMR) Quick Ratio 1.5 Times Accounts Receivable 150 (Thousand OMR) Long-term Liabilities 200 (Thousand OMR)
Current assets of a company are a major component of total assets of a company that are expected to be held for one accounting period i.e. those assets which have a useful life of less than or equal to 12 months.
Inventory turnover ratio is a financial ratio depicting the level of inventory to be sold or utilized by the company over an accounting period.
Part 1 :
Computation of total assets (2019) :
Computation of Current Assets (2019) :
Computation of Current Liabilities (2019) :
Computation of Current Ratio (2019) :
New Current Ratio (2020) :
The proposed plan states that the current ratio will be reduced by 33% from previous year.
Computation of reduction in current assets :
Therefore, in order to achieve the target, the current assets would be reduced to 400,000 OMR.
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