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Inventory Amount

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ABC Company has a current ratio of 3.5 to 1 and an acid-test ratio of 2.8 to 1. Current assets equal $175,000 of which $5,000 consists of prepaid expenses. ABC Company's inventory must be:

A) $30,000.
B) $40,000.
C) $50,000.
D) $35,000.

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Solution Preview

Current ratio = Current Assets/Current Liabilities = 3.5
Acid test ratio = ...

Solution Summary

The solution explains how to calculate the inventory amount given the current and quick ratio