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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 tumover ratio, and the total asset turnover ratio Consider the following case: Franklin Aerospace has a quick ratio of 2.00x, $38,250 in cash, $21,250 in accounts receivable, some inventory, total current assets of $85,000, and total current liabilities of $29,750. The company reported annual sales of $800,000 in the most recent annual report. Over the past year, how often did Franklin Aerospace sell and replace its inventory? 31.37 2.86 34.51 x 8.01 x The inventory turnover ratio across companies in the aerospace Industry is 26.66x. Based on this information, which of the following statements is true for Franklin Aerospace? Franklin Aerospace is holding less inventory per dollar of sales compared to the industry average. Franklin Aerospace is holding more 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 $800,000 each. You've collected company data to compare Like Games and Our Play. Last year, the average sales for all industry competitors was $2,040,000. 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 23,000 Accounts receivable Data Collected in dollars) Like Games Our Play 21,600 31,200 440,000 640,000 760,000 1,000,000 Net fixed assets 1,734,000 1,876,800 Total assets Using this information, complete the following statements to include in your analysis. than the industry average. It takes Our Play time to 1. Our Play has days of sales tied up in receivables, which is much collect cash from its customers than it takes Like Games 2. Like Games's fixed assets turnover ratio is 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 amount for its fixed assets. 3. The average total assets turnover in the electronic toys industry is 1.09x, which means that $1.09 of sales is being generated with every dollar of investment in assets. A total assets turnover ratio indicates greater efficiency. Both companies' total assets turnover ratios are than the industry average than 1. Our Play has collect cash from days of sales tied up in receivables, which is much Tomers than it takes Like Games. 14.24 2. Like Games's 9.86 sets turnover ratio is than that of Our Play. This is because than the industry average. It 1. Our Play has days of sales tied up in receivables, which is much collect cash from its customers than it takes Like Games. higher 2. Like Games's fixed assets turnover ratio is_ than that of Our Play lower because Like Games was formed acquisition cost of its fixed assets is recorded at historic values when the company bought its assets and has been deprec that fixed assets prices (not book values) rose over the past six vare dentalne up in receivables, which is much than it takes Uke Games than the industry average. It takes Our Play over te than that of Our Play. This is because Like Games was formed eight years agd more s recorded at historic values when the company bought its assets and has been depreciated since ther. As 6) rose over the past six years due to inflation, Our Play paid a amount for it time to less o De eectronic toys industry is 1.09x, which means that s tumover ratio indicates great pry 2. Uke Games's faced assets turnover ratio is acquisition cost of its fired assets is recorded that fixed assets prices (not book values) rose than that of Our Play. This is because Like Games was formed eight years ago, so the values when the company bought its assets and has been deprecated since then. Assuming past six years due to inflation, Our Play paida_ amount for its foxed assets. lower 2. Like Games's fixed assets turnover ratio is 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 amount for its fixed assets. 3. The average total assets turnover in the electronic toys industry is 1.09x, which means that $1.09 being generated with every dollar of Investment in assets. A total assets turnover ratio indicates greater efficiency. Both compllower bl assets turnover ratios are than the industry average For Introductory nance acquisition cost of its fixed assets is recorded at historic values when the company bought its assets and h that fixed assets prices lower values) rose over the past six years due to inflation, Our Play paid a higher 3. The average total asd jver in the electronic toys industry is 1.09x, which means that $1.09 of sal investment in assets. A total assets turnover ratio indicates greater efficiency. Both companies than the industry average. edback Mil Uames's fixed assets turnover ratio is than that of Our Play. This is because Like Game acquisition cost of its fixed assets is recorded at historic values when the company bought its assets and has that fixed assets prices (not book values) rose over the past six years due to inflation, Our Play paid a higher prage total assets turnover in the electronic toys industry is 1.09x, which means that $1.09 of sales lower it in assets. A total assets turnover ratio indicates greater efficiency. Both companies' to than the industry average