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 $100,000 each. You’ve collected company data to compare Like Games and Our Play. Last year, the average sales for all industry competitors was $255,000. 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.) Data Collected (in dollars) Like Games Our Play Industry Average Accounts receivable 2,700 3,900 3,850 Net fixed assets 55,000 80,000 216,750 Total assets 95,000 125,000 234,600 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, is collecting cash from its customers faster than , but both companies are collecting their receivables less quickly than the industry average. 2. Our Play’s fixed assets turnover ratio is 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 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.

College Accounting (Book Only): A Career Approach

12th Edition

ISBN:9781305084087

Author:Cathy J. Scott

Publisher:Cathy J. Scott

Chapter12: Financial Statements, Closing Entries, And Reversing Entries

Section: Chapter Questions

Problem 1A: Costco is the largest chain of membership warehouse clubs in the world based on sales volume, and it...

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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 $100,000 each. You’ve collected company data to compare Like Games and Our Play. Last year, the average sales for all industry competitors was $255,000. 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.)

Data Collected (in dollars)

	Like Games	Our Play	Industry Average
Accounts receivable	2,700	3,900	3,850
Net fixed assets	55,000	80,000	216,750
Total assets	95,000	125,000	234,600

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, is collecting cash from its customers faster than , but both companies are collecting their receivables less quickly than the industry average.
2.	Our Play’s fixed assets turnover ratio is 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 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.

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