Question

Correctly answer is part of question 3

Aa Aa 3. Asset management ratios Asset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has invested in a particular type of asset (or group of assets) to the amount of revenues the asset is generating. Examples of asset management ratios include the average collection period (also called the days sales outstanding ratio), the inventory turnover ratio, the fixed asset turnover ratio, and the total asset turnover ratio. Consider the following case: Crockett Electronics has a quick ratio of 2.00x, $33,525 in cash, $18,625 in accounts receivable, some inventory, total current assets of $74,500, and total current liabilities of $26,075. The company reported annual sales of $700,000 in the most recent annual report. Over the past year, how often did Crockett Electronics sell and replace its inventory? O 34.45 x O 2.86 x O 31.32 x O 8.01 x The inventory turnover ratio across companies in the electronics industry is 26.62x. Based on this information, which of the following statements is true for Crockett Electronics? O Crockett Electronics is holding less inventory per dollar of sales compared to the industry average O Crockett Electronics is holding more inventory per dollar of sales compared to the industry average.

Answer 1

1)	CROCKETT ELECTRONICS:
	Value of inventory = 74500-33525-18625 =	22350
	Inventory turnover = 700000/22350 =	31.32
	Answer: 31.32 x
2)	Statement true for Crockett Electronics:
	*Crockett Electronics is holding more inventory per dollar of sales
	compared……………………………………..industry average:
3)	COMPUTATONS OF RATIOS:	Like Games	Our Play	Industry Average
	Accounts receivable	18900	27300	26950
	Net fixed assets	385000	560000	1517250
	Total assets	665000	875000	1642200
	Sales	700000	700000	1785000
	Ratios:
	Days sales outstanding [AR*365/Sales)	9.86	14.24	5.51
	Fixed asset turnover ratio (Sales/Fixed assets)	1.82	1.25	1.18
	Total assets turnover ratio (Sales/Total assets)	1.05	0.80	1.09
	FILLING IN THE BLANKS:
1)	A 5.51 days sales………………policy. Between………….Like Games is collecting…………………..faster
	than Our Play, but both the companies…………………………….the industry.
2)	Our Play's fixed …………………ratio is less than…………….This could be because Our Play………….
	………….cost of its fixed assets is more than ………………….assets.
3)	Like Games' total……………………………………………………	ratio is 1.05,which is less than………………….
	In general……………………………greater efficiency.