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27 February, 20:02

Mandesa, Inc., has current liabilities of $8 million, current ratio of 2 times, inventory turnover of 12 times, average collection period of 30 days, and credit sales of $64 million.

Calculate the value of cash and marketable securities. (Use 365 days a year. Round your intermediate calculations and final answer to the nearest dollar amount.)

Cash and marketable securities $

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  1. 27 February, 21:09
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    The answer is: Cash and marketable securities $5,406,393

    Explanation:

    We have:

    + Current ratio = Current asset / Current liabilities = 2; with Current liabilities is given at $8 million = > Current asset is $16 million;

    + Current asset = Inventory + Account Receivable + Cash and marketable securities Cash and marketable securities = $16 million - Inventory - Account Receivable (as current asset is calculated above at $16 million)

    + Average collection period = Account Receivable / Credit Sales x 365 Account Receivable = Average collection period/365 x Credit sales = 30/365 x 64 million = $5,260,274

    + Inventory turnover = Sales / Inventory Inventory = Sales / Inventory turnover = 64 million / 12 = $5,333,333

    => Cash and marketable securities = 16,000,000 - 5,333,333 - 5,260,274 = $5,406,393.
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