Perry Technologies Inc. had the following financial information for the past year: Inventory turnover = 8
Quick ratio = 1.5
Sales = $860,000
Current ratio = 1.75
What were Perry's current liabilities?
A) $430,000
B) $500,000
C) $107,500
D) $ 61,429
E) $573,333

Question

Quizplus · Accepted Answer

Current liabilities = Current assets - Current assets = (Current ratio * Current liabilities) - Current assets= (1.75 * Current liabilities) - Current assets= (1.75 * Current liabilities) - (Sales / Inventory turnover)= (1.75 * Current liabilities) - (860,000 / 8)= (1.75 * Current liabilities) - 107,500= 1.75 * Current liabilities = 107,500 + Current assets= Current liabilities = (107,500 + Current assets) / 1.75= Current liabilities = (107,500 + (860,000 / 1.5)) / 1.75= Current liabilities = (107,500 + 573,333) / 1.75= Current liabilities = 680,833 / 1.75= Current liabilities = $430,000