1 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 Walker Telecommunications has a quick ratio of 2 00x, $35,550 in cash, $19,750 in accounts receivable, some inventory, total current assets of $79,000, and total current liabilities of $27,650 The company reported annual cost of goods sold of $200,000 in the most recent annual report Over the past year, how often did Walker Telecommunications sell and replace its inventory A 9 28 x B 8 44 x C 8 01 x D 2 86 x 2 The inventory turnover ratio across companies in the telecommunications industry is 7 17x Based on this information, which of the following statements is true for Walker Telecommunications Walker Telecommunications is holding more inventory per dollar of sales compared to the industry average Walker Telecommunications is holding less inventory per dollar of sales compared to the industry average 3 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 1A Our Play has (9 86 14 24) days of sales tied up in receivables, which is much HIGHER LOWER than the industry average It takes Our Play MORE LESS time to collect cash from its customers than it takes Like Games 2B Like Gamess fixed assets turnover ratio is LOWER HIGHER 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 historic 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 LOWER HIGHER amount for its fixed assets 3C 3 The average total assets turnover in the electronic toys industry is 1 09x 80x , which means that $ 80 $1 09 of sales is being generated with every dollar of investment in assets A HIGHER LOWER total assets turnover ratio indicates greater efficiency Both companies total assets turnover ratios are HIGHER LOWER than the industry average

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1. Asset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has invested in a

1. 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:

Walker Telecommunications has a quick ratio of 2.00x, $35,550 in cash, $19,750 in accounts receivable, some inventory, total current assets of $79,000, and total current liabilities of $27,650. The company reported annual cost of goods sold of $200,000 in the most recent annual report.

Over the past year, how often did Walker Telecommunications sell and replace its inventory?

A. 9.28 x

B. 8.44 x

C. 8.01 x

D. 2.86 x

2. The inventory turnover ratio across companies in the telecommunications industry is 7.17x. Based on this information, which of the following statements is true for Walker Telecommunications?

Walker Telecommunications is holding more inventory per dollar of sales compared to the industry average.

Walker Telecommunications is holding less inventory per dollar of sales compared to the industry average.

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.

1A. Our Play has (9.86/14.24) days of sales tied up in receivables, which is much HIGHER/LOWER than the industry average. It takes Our Play MORE/LESS time to collect cash from its customers than it takes Like Games.

2B. Like Gamess fixed assets turnover ratio is LOWER/HIGHER 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 historic 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 LOWER/HIGHER amount for its fixed assets.

3C. 3. The average total assets turnover in the electronic toys industry is 1.09x/.80x , which means that $.80/$1.09 of sales is being generated with every dollar of investment in assets. A HIGHER/LOWER total assets turnover ratio indicates greater efficiency. Both companies total assets turnover ratios are HIGHER/LOWER than the industry average.