3. Asset management ratios Asset management ratios are used to measure how effectively a firm manages its assets. Consider the following case: Payables for Tantium Drilling Inc. as of December 31, 2015, were $70 million. During that same period, annual operating costs, or cost of goods sold (COGS), were $2,889.5 million. Based on this information, what would be the average payable period (APP) in days? 12 days 6 days 14 days 9 days 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 $200,000 each. You've gathered up company data to compare Like Games and Our Play. Last year, the average sales for industry competitors was $510,000. As an analyst, you want to make comments on the expected performance of these two companies in the coming year. You've collected data from the companies' financial statements. This information is listed as follows: Data Collected (in dollars) Like Games Our Play Industry Average Accounts receivable 5,400 7,800 7,700 Net fixed assets 110,000 160,000 433,500 Total assets 190,000 250,000 469,200 Using this information, complete the following statements to include in your analysis. 1. Our Play has days' sales tied up in receivables, which is much to collect cash from its customers than it takes Like Games. than the industry average. It takes Our Play time 2. Like Games's fixed assets turnover ratio is than that of Our Play. This is because Like Games was formed eight years ago, so the acquisition cost of its fixed assets is recorded at historical values when the company bought its assets and has been depreciated since then. Assuming that fixed assets prices (not book values) rose over the past six years due to inflation, Our Play paid a amount for its fixed assets. 3. The average total assets turnover in the electronic toys industry is 1.09 times, which means that $1.09 of sales is being generated with every dollar of investment in assets. A total assets turnover ratio indicates greater efficiency. Both companies' total assets turnover ratios are than the industry average.

3. Asset management ratios Asset management ratios are used to measure how effectively a firm manages its assets. Consider the following case: Payables for Tantium Drilling Inc. as of December 31, 2015, were $70 million. During that same period, annual operating costs, or cost of goods sold (COGS), were $2,889.5 million. Based on this information, what would be the average payable period (APP) in days? 12 days 6 days 14 days 9 days 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 $200,000 each. You've gathered up company data to compare Like Games and Our Play. Last year, the average sales for industry competitors was $510,000. As an analyst, you want to make comments on the expected performance of these two companies in the coming year. You've collected data from the companies' financial statements. This information is listed as follows: Data Collected (in dollars) Like Games Our Play Industry Average Accounts receivable 5,400 7,800 7,700 Net fixed assets 110,000 160,000 433,500 Total assets 190,000 250,000 469,200 Using this information, complete the following statements to include in your analysis. 1. Our Play has days' sales tied up in receivables, which is much to collect cash from its customers than it takes Like Games. than the industry average. It takes Our Play time 2. Like Games's fixed assets turnover ratio is than that of Our Play. This is because Like Games was formed eight years ago, so the acquisition cost of its fixed assets is recorded at historical values when the company bought its assets and has been depreciated since then. Assuming that fixed assets prices (not book values) rose over the past six years due to inflation, Our Play paid a amount for its fixed assets. 3. The average total assets turnover in the electronic toys industry is 1.09 times, which means that $1.09 of sales is being generated with every dollar of investment in assets. A total assets turnover ratio indicates greater efficiency. Both companies' total assets turnover ratios are than the industry average.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 27E: Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the...

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