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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
5,400
110,000
190,000
Industry Average
7,800 7,700
160,000
250,000
2. Our Play's fixed assets turnover ratio is
acquisition cost of its fixed assets is
433,500
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.
3. Like Games's total assets turnover ratio is
which is
than the industry's average total assets turnover ratio. In general, a
higher total assets turnover ratio indicates greater efficiency.
Transcribed Image Text: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 5,400 110,000 190,000 Industry Average 7,800 7,700 160,000 250,000 2. Our Play's fixed assets turnover ratio is acquisition cost of its fixed assets is 433,500 469,200 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. 3. Like Games's total assets turnover ratio is which is than the industry's average total assets turnover ratio. In general, a higher total assets turnover ratio indicates greater efficiency.
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:
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?
8.01x
9.11x
O8.28x
O 2.86x
The inventory turnover ratio across companies in the aerospace Industry is 9.108x. Based on this information, which of the following statements is
true 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.
Transcribed Image Text: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: 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? 8.01x 9.11x O8.28x O 2.86x The inventory turnover ratio across companies in the aerospace Industry is 9.108x. Based on this information, which of the following statements is true 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.
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