Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

new level of current assets be in order for the firm to reach deisred current ratio? what is the amount he would need to cut

new level of current assets be in order for the firm to reach deisred current ratio?
what is the amount he would need to cut inventory levels by?
and what would be the new level of inventory
image text in transcribed
image text in transcribed
Cash Receivables Inventories Total CA Net fixed assets Total assets $ 14,000 70,000 280,000 $364,000 126,000 $490,000 Accounts payable Other current liabilities Total CL Long-term debt Common equity Total liab, and equity $ 42,000 $ 70,000 140,000 28,000 280,000 $490,000 Sales $280,000 Net income $21,000 Kruger's new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.75, without affecting either sales or net income. 1. What would Kruger's new level of current assets be in order for the firm to reach the desired Current Ratio? Assume current liabilities stay the same. 2. In order to reach the target current asset level you just found in question 1, what is the amount Kruger would need to cut inventory levels by? And, what would be the new level of inventory for Kruger

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Research In Finance

Authors: John W. Kensinger

1st Edition

0857245414, 978-0857245410

More Books

Students also viewed these Finance questions