A firm has sales of $1,200, net income of $200, net fixed assets of $500, and current assets of $300. The firm has $100 in inventory. What is the common-size statement value of inventory?
12.5%
To calculate the common-size statement value of inventory, we need to express the inventory as a percentage of a specific financial statement item. In this case, let's express it as a percentage of the total assets.
To find the value of inventory as a percentage of total assets, we first need to calculate the total assets.
Total assets can be calculated by summing up the net fixed assets and current assets. In this case, the net fixed assets are given as $500, and the current assets are given as $300. Hence, the total assets can be calculated as:
Total assets = Net fixed assets + Current assets
Total assets = $500 + $300
Total assets = $800
Now that we have the total assets, we can calculate the common-size statement value of inventory.
Common-size statement value of inventory = (Inventory / Total assets) * 100
Given that the inventory is $100 and the total assets are $800, we can calculate:
Common-size statement value of inventory = ($100 / $800) * 100
Common-size statement value of inventory = 0.125 * 100
Common-size statement value of inventory = 12.5%
Therefore, the common-size statement value of inventory is 12.5%.