Question

MINDTA Chapt Monroe Manufacturing has a quick ratio of 2.00x, $25,425 in cash, $14,125 in accounts receivable, some inventory, total current assets of and total current liabilities of $19,775. The company reported annual sales of $200,000 in the most recent annual report. Over the past year, how often did Monroe Manufecturing sell and replace its inventory? O 286x 8.01x 12.98x O 11.80 x The inventory turnover ratio across companies in the manufacturing industry is 10.03x. Based on this information, which of the following statements is true for Monroe Manufacturing? O Monroe Manufacturing is holdng more inventory per dolar of sales compared to the industry average O Monroe Manufacturing is holding less inventory per dellar of sales compared to the industry average. toys-Like Games Inc. and Our Play Inc. Like Games was launched eight years two years. However, both companies have an You are analyzing two companies that manufacture electronikc ago, whereas Our Play is a relatively new company that has been in equal market share with sales of $200,000 each. You've collected sales for all industry competitors was $510,000. As an analyst, you want to make comments on the companies in the coming year. You've collected data from the companies' financial statements. This information is listed as follows: company data to compare Like Games and Our Play. Last year, the average want to make comments on the expected performance of these two Data Collected (in dollars) Our Play 7,800 Industry Average 7,700 433,500 469,200 Accounts receivable 5,400 110,000 190,000 Total assets 250,000 Using this information, complete the following statements to include in your analysis. 1. Our Play has tme to collect cash from its customers than it takes Like Games. 2. Like Games's fixed assets turnover ratio is acquisition coat of ts fixed assets is recorded at historic values when the company bought its assets and has been deprecisted since then Assuming that sixed assets prices (not book values) rose over the past six years due to inflation, Our Play paid a days of sales tied up in receivables, which is much than the industry average. It takes Our Play than that of Our Play. This is because Like Games was fermed eight years ago, so the amount for its fixed O Type here to search PrtScn Hom 4

Answer 1

Quick ratio=	(Cash and Equivalents + Marketable Securities + Accounts Receivable) / Current Liabilities
Quick ratio=	(Current assets - Inventory) / Current liabilities
2=	(56500-I)/19775
I=	16950
Inventory turnover ratio=	COGS/ Average Inventory

Assuming, based on limited information, that the sales= COGS and average inventory levels remain stable

Inv TO=	=200000/16950
	11.7994	times
Industry average=	10.03	times

More the turnover, less the average inventory holding period and holding quantity. Hence option B is correct

Like games and Our play
1
	Our Play	Industry
days of sales in receivables=	receivable/ sales * 365	receivable/ sales * 365
	=7800/ 200000 * 365	=7700/ 510000 * 365
	14.24	5.51
	HIGHER than industry average
	More time to collect cash
2
fixed asset TO ratio=	net sales/ (Fixed assets - depreciation)
	=200000/110000	=200000/160000
	1.82	1.25

Our Play was formed later when the asset prices had increased so it paid MORE than Like Games for acquiring FA

3
total asset TO ratio=	net sales/ Total assets
	=200000/190000	=200000/250000
	1.05	0.80

A GREATER total asset TO means greater efficiency since, more sales is generated for every $ of assets.
Both companies have a LOWER total asset TO than industry average