Question

The options for answers are

High/Low/Like Games/Our play/0.80/1.05/greater/lower

Keep the Highest: /S Attempts: 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 Crawford Construction has a quick ratio of 2.00x, $32,175 in cash, $17,875 i accounts receivable, some inventory, total current assets $300.000 in the most recent annual report. f $71,500, and total current liabilities of $25,025. The company reported annual sales Crawford Construction sell and replace its inventory? Over the past year, how often 9c6407fe-8b69-4f6 .pq ^ Over the past year, how often did Crawford Construction sell and replace its inventory? 8.01 x 13.99 x 2.86 > 15.39 x The inventory turnover ratio across companies the construction industry is 15.39x. Based on this information, which of the following statements is true for Crawford Construction? the industry average. Crawford Construction is holding more inventory per dollar of sales compared Crawford Construction is holding less inventory per dollar of sales compared to the industry average You are analyzing two companles that manufacture electronic toys-Like Games Inc. and Our Play Inc. Like Games was launched elght years ago, whereas Our Play is a relatively new company that has been in operation for only the past two years. However, both companies have an equal market share with sales f $300,000 each. You've collected company data to compare Like Games and Our Play. Last year, the average sales for all industry gc6407fe-8b69-4f6..ipa A You are analyzing two companies that manufacture electronic toys-Like Games Inc. and Our Play Inc. Like Games was launched eight years ago, whereas Our Play is a relatively new company that has been in operation for only the past two years. However, both companies have an equal market share with sales of $300,000 each. You've collected company data to compare Like Games and Our Play. Last year, the average sales for all industry competitors was $765,000. As an analyst, you want to make comments on the expected performance of these two companies in the coming year You'v collected data from the companies' financial statements. This information is listed as follows: Data Collected (in dollars) Like Games Our Play Industry Average Accounts recelvable 8,100 11,700 8,625 Net fixed assets 165,000 240,000 650,250 Total assets 285,000 375.000 703,800 Using this information, complete the following statements to include in your analysis. 1. A days of sales outstanding represents an efficlent credit and collectlon pollcy. Between the two companles, collecting cash from its customers faster than but both companies are collecting their receivables less quickly than the industry average 9c6407fe-8b69-4f6jpg^ Accounts recelvable 8,100 11,700 8,625 Net fixed assets 165,000 240,000 650,250 Total assets 285,000 375,000 703,800 Using this information, complete the following statements to include your analysis. 1. A days of sales outstanding represents an efficient credit and collection policy. Between the two companies, je , but both companies are collecting their receivables less quickly than the industry collecting cash from its customers faster than average a relatively new company, so the 2. Our Play's fixed assets turnover ratio is than that of Like Games. This could be because Our Play than the recorded cost of Like Games's net fixed assets acquisitlon cost Its fixed assets is than the industry's average total assets turnover ratio. In general, a 3. Like Games's total assets turnover ratio is which is higher total assets turnover ratio indicates greater efficiency. Save & Continue Grade It Now Continue without saving 9c6407fe-8b69-4f6...jpg

Answer 1

Answer a.

Current Assets = Cash + Accounts Receivable + Inventory
$71,500 = $32,175 + $17,875 + Inventory
Inventory = $21,450

Inventory Turnover = Annual Sales / Inventory
Inventory Turnover = $300,000 / $21,450
Inventory Turnover = 13.99 x

Answer b.

Crawford Construction is holding more inventory per dollar of sale compared to the industry average.

Answer c.

Like Games:

Days of Sales Outstanding = 365 * Accounts Receivable / Sales
Days of Sales Outstanding = 365 * $8,100 / $300,000
Days of Sales Outstanding = 9.86 days

Fixed Assets Turnover = Sales / Net Fixed Assets
Fixed Assets Turnover = $300,000 / $165,000
Fixed Assets Turnover = 1.82

Total Assets Turnover = Sales / Total Assets
Total Assets Turnover = $300,000 / $285,000
Total Assets Turnover = 1.05

Our Play:

Days of Sales Outstanding = 365 * Accounts Receivable / Sales
Days of Sales Outstanding = 365 * $11,700 / $300,000
Days of Sales Outstanding = 14.24 days

Fixed Assets Turnover = Sales / Net Fixed Assets
Fixed Assets Turnover = $300,000 / $240,000
Fixed Assets Turnover = 1.25

Total Assets Turnover = Sales / Total Assets
Total Assets Turnover = $300,000 / $375,000
Total Assets Turnover = 0.80

Industry Average:

Days of Sales Outstanding = 365 * Accounts Receivable / Sales
Days of Sales Outstanding = 365 * $8,625 / $765,000
Days of Sales Outstanding = 4.12 days

Fixed Assets Turnover = Sales / Net Fixed Assets
Fixed Assets Turnover = $765,000 / $650,250
Fixed Assets Turnover = 1.18

Total Assets Turnover = Sales / Total Assets
Total Assets Turnover = $765,000 / $703,800
Total Assets Turnover = 1.09

A low days of sales outstanding represents an efficient credit and collection policy. Between the two companies, Like Games is collecting cash from its customers faster than Our Play, but both companies are collecting their receivables less quickly than the industry average.

Our Play’s fixed assets turnover ratio is lower than that of Like Games. This could be because Our Play is a relatively new company, so the acquisition cost of its fixed assets is higher than the recorded cost of Like Games’s net fixed assets.

Like Games’s total assets turnover ratio is 1.05, which is lower than the Industry’s average total assets turnover ratio. In general, a higher total assets turnover ratio indicates greater efficiency.