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AAFM CWM_LEVEL_2 Exam - Topic 1 Question 50 Discussion

Section C (4 Mark)Zoya Ltd has the following Balance sheet for FY 2005-2006:The Total Sales for the year was Rs. 6,00,000.The company president believes the company carries excess inventory. Accordingly he wants the inventory turnover ratio to be 8x and would use the freed up cash to reduce current liabilities. If the company follows the president's recommendation and sales remain the same, the new quick ratio would be:
B) 3
A) 2.4
C) 4.5
D) 1.2

AAFM CWM_LEVEL_2 Exam - Topic 1 Question 50 Discussion

Actual exam question for AAFM's CWM_LEVEL_2 exam
Question #: 50
Topic #: 1
[All CWM_LEVEL_2 Questions]

Section C (4 Mark)

Zoya Ltd has the following Balance sheet for FY 2005-2006:

The Total Sales for the year was Rs. 6,00,000.

The company president believes the company carries excess inventory. Accordingly he wants the inventory turnover ratio to be 8x and would use the freed up cash to reduce current liabilities. If the company follows the president's recommendation and sales remain the same, the new quick ratio would be:

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Suggested Answer: B

by Angella at Oct 22, 2022, 04:43 PM

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Kenneth
9 months ago
I’m leaning towards 4.5, but it’s a tough call.
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Antione
9 months ago
Totally agree, excess inventory can really hurt liquidity!
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Rose
9 months ago
8x seems too high for this company, not sure it’s realistic.
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Lera
9 months ago
I think 3 is the right answer.
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Ora
9 months ago
The inventory turnover ratio is key for cash flow!
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Jean
10 months ago
I think if they reduce inventory to achieve that turnover, it should improve the quick ratio significantly, but I can't recall the exact numbers we used in practice.
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Ashley
10 months ago
I feel a bit lost on how to apply the turnover ratio here. Did we cover how to adjust the quick ratio based on inventory changes?
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William
10 months ago
This question seems similar to one we did in class about adjusting inventory levels. I think I need to recalculate the current liabilities after the inventory change.
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Francesco
10 months ago
I remember we practiced calculating the quick ratio, but I'm not entirely sure how the inventory turnover affects it directly.
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Nan
10 months ago
Hmm, I'm a bit confused. I'm not sure if checking the Access Keys is the right approach here. The question doesn't mention anything about Access Keys, so that might not be the best solution.
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Talia
10 months ago
I'm a little confused by the options, I'll need to review my notes on server types before answering this.
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Dominque
10 months ago
I think the OSPF network type for a PPP connection is point-to-point, but I'm not entirely sure.
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Florinda
10 months ago
Hmm, this seems like a tricky one. I'll need to think it through carefully.
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