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 marketshare with sales of $200,000 each. You've collected company data to compare Like Games and Our Play. Last year, the average sales for all industrycompetitors 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: (Note: Assume there are 365 days in a year.)Accounts receivableNet fixed assetsTotal assetsData Collected (in dollars)Like Games Our Play5,400110,000190,000Industry Average7,800 7,700160,000250,0002. Our Play's fixed assets turnover ratio isacquisition cost of its fixed assets is433,500469,200Using this information, complete the following statements to include in your analysis.1. A days of sales outstanding represents an efficient credit and collection policy. Between the two companies,cash from its customers faster thanis collectingbut both companies are collecting their receivables less quickly than the industry average.than that of Like Games. This could be because Our Play is a relatively new company, so thethan the recorded cost of Like Games's net fixed assets.3. Like Games's total assets turnover ratio iswhich isthan the industry's average total assets turnover ratio. In general, ahigher total assets turnover ratio indicates greater efficiency. 3. Asset management ratiosAsset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has invested in a particulartype of asset (or group of assets) to the amount of revenues the asset is generating. Examples of asset management ratios include the averagecollection period (also called the days sales outstanding ratio), the inventory turnover ratio, the fixed asset turnover ratio, and the total asset turnoverratio.Consider the following case:Franklin Aerospace has a quick ratio of 2.00x, $36,225 in cash, $20,125 in accounts receivable, some inventory, total current assets of$80,500, and total current liabilities of $28,175. The company reported annual sales of $200,000 in the most recent annual report.Over the past year, how often did Franklin Aerospace sell and replace its inventory?8.01x9.11xO8.28xO 2.86xThe inventory turnover ratio across companies in the aerospace Industry is 9.108x. Based on this information, which of the following statements istrue for Franklin Aerospace?Franklin Aerospace is holding more inventory per dollar of sales compared with the industry average.O Franklin Aerospace is holding less inventory per dollar of sales compared with the industry average.

The turnover ratios are based mainly on the turnover (or sales revenue) of the company or industry.…

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 collected company data to compare Like Games and Our Play. Last year, the average sales for all 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: (Note: Assume there are 365 days in a year.) Accounts receivable Net fixed assets Total assets Data Collected (in dollars) Like Games Our Play Industry Average 5,400 7,800 7,700 110,000 160,000 433,500 190,000 250,000 469,200 Using this information, complete the following statements to include in your analysis. 1. A days of sales outstanding represents an efficient credit and collection policy. Between the two companies, cash from its customers faster than is collecting ,,but both companies are collecting their receivables less quickly than the industry average. than that of Like Games. This could be because Our Play is a relatively new company, so the than the recorded cost of Like Games's net fixed assets. which is than the industry's average total assets turnover ratio. In general, a 2. Our Play's fixed assets turnover ratio is acquisition cost of its fixed assets is 3. Like Games's total assets turnover ratio is higher total assets turnover ratio indicates greater efficiency.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q