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 indude 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: Crawford Construction has a quick ratio of 2,00x,$32,175 in cash, $17,875 in accourts receivable, some inventory, total current assets of $71,500, and total current liabilities of $25,025. The company reported annual sales of $300,000 in the most recent annial report. Additiocally, the company's cost of goods sold is 75% of sales. Over the past vear, how often did Crawford Construction sell and repilace its inventory? 10.49x 8.01 11.54x 2.86x The imventory turnover ratio across comparies in the construction industry is 3.9165x. Based os this information, which of the folioning statements is true for Crawford Construction? Crawford Construction is holding more imventory per dollar of sales cempared with the industry average: Cravford Construction is holding less inventory per dollar of sales cempared with the industry average. Crawford Construction is holding less inventory per doliar of sales cempared with the industry average. You are analyzing two companies that manufacture electronic toys-Lke Games fnc. 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 $300,000 each, You've collected company data to compare Like Games and Our play. Last vear, the average sales for all industry competitors was $765,000. As an analyst, you want to make comments on the expected performance of these two companies in the coming yeat. You've collected data from the companies' financial statements. This information is listed as follows: (Note: Assume there are 365 days in a year.) Using this information, complete the following statements to indude in your analysis. 1. Our Play has days of sales bed up in receivables; which is much than the indestry averape. It takes Our Plar time to collect cash from its customers than it takes Like Games. 2. Like Gacres's foxed assets turnover ratio is than that of Our Play. This is becaure uike Games was formed eight vears ago, so the acquisition cost of its fixed assets is recorded at historic values when the company boughe ies assets and has been deprecated since then. Assuming that foced assets prices (not bock values) rose over the cast six years due to inflation, Our play paid a amount for its fixed assets. 3. The average total assets tumover in the electronic tors industry is , which means that of sales is beieg penerated with every dollar of investment in assets. A total assets tumover ratio ind icates greater efficiency. Both companies' total assets tumover ratios are than the industry average