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Originally Posted by Kiwi Lover
Snazz,
First of all, there wasn't one question on the Finance exam like the one you've listed, but I'll list out how I would have come up with the answer anyway. It's definitely a step-by-step process to come up with the right answer! Here goes:
1. First you need to compute what the assets are. Current ratio is 2.4, and current ratio is current assets divided by current liabilities. They said current liabilities were $600,000, so to get current assets I multiplied the $600,000 times 2.4. So assets = $1,440,000.
2. Now that you know what the assets equal, you can figure out what the inventory number is. Quick ratio is 1.5, and quick ratio is current assets minus inventory divided by current liabilities. We know that current assets = $1,440,000 and current liabilities = $600,000. So we multiply $600,000 times 1.5 (the quick ratio) to equal $900,000. Then deduct this number from the $1,440,000 in assets to equal the difference of $540,000, which is your inventory number.
3. If inventory is $540,000 and inventory turnover is 6 times, then $540,000 times 6 equals $3,240,000 in sales.
I hope that makes sense!!  |
Dyamn JoAnne...did you swallow a calculator? You're like....you're like...like a...like a Math Genius or sumpin' ain't ya?
It DOES make total sense to me now that you put the pieces together. It was frustrating me that I knew what all the individual pieces of the puzzle were, but I just couldn't put them together to get the sales level.
I'm GLAD there won't be any questions like that on the exam...because I'm all out of Jack Daniels!
Actually, I have studied very hard and am not feeling too bad about this exam now. I got 18 out of 20 questions correct on the TESC mock without much difficulty at all. I know the terminology and can do most of the math involved in working out the ratios, TVM, NPV, IRR, PI, cost of capital etc.
I've got Finance coming out of my ears! I woke up violently in the night, screaming "Noooooooo...your Debt to Equity Ratio is too high...For the love of God, turn back now before it's too late!"
So we'll see how it goes. I'm hoping to schedule the exam for sometime this week or early next week.
I'll give it my best shot,
Snazzlefrag