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: Crawford Construction has a quick ratio of 2.00x, $32,175 in cash, $17,875 in accounts 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 annual report. Over the past year, how often did Crawford Construction sell and replace its inventory? 15.39 x 2.86 x 13.99 x 8.01 x The inventory turnover ratio across companies in the construction industry is 15.39x. Based on this information, which of the following statements is true for Crawford Construction? Crawford Construction is holding more inventory per dollar of sales compared to the industry average. Crawford Construction is holding less inventory per dollar of sales compared to the industry average. 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 $300,000 each. You've collected company data to compare Like Games and Our Play. Last year, 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 year. You've collected data from the companies' financial statements. This information is listed as follows: Industry Average Data Collected (in dollars) Like Games Our Play 8,100 11,700 165,000 240,000 Accounts receivable 8,625 Net fixed 650,250 assets Total assets 285,000 375,000 703,800 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 acquisition cost of its fixed assets is 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. than the industry's average total assets turnover ratio. In general, a 3. Like Games's total assets turnover ratio is 2, which is higher total assets turnover ratio indicates greater efficiency