If the Golden Braid Bookstore has a current (or working capital) ratio of 8.25:1, $40,000 in accounts receivable, $340,000 in cash, $65,000 in accounts payable and $15,000 in other current liabilities, how much inventory do they have? a) $55,000b) $280,000c) $825,000d) $34,000

inventory 280,000

Explanation:

current liaiblities:

65,000 A/P

15,000 other current liaiblities

total 80,000

As the rate is 8.25:1

There is 8.25 times as much current asset than liabilities:

80,000 x 8.25 = 660,000 current assets

We subtract from this the know values of current asset and solve for inventory:

current assets 660,000

A/R (40,000)

cash (340,000)

inventory 280,000