cha 4 analysis #3

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: Polk Software Inc. has a quick ratio of 2.00x,$32,850 in cash, $18,250 in accounts receivable, some inventory, total current assets of $73,000, and total current liabilities of $25,550. The company reported annual sales of $100,000 in the most recent annual report. Additionally, the company's cost of goods sold is 75% of sales. Over the past year, how often did Polk Software Inc, sell and replace its inventory? 3.76x 3.42x 2,86x 8.01x The inventory turnover ratio actoss companies in the software industry is 3.762x. Based on this intormation, true for Polk Software inc? Aolk software inc is holding more inventory per dollar of sales compared with the industry average: Polk Software Inc. is holding less inventory per doliar of sales compared with the industry average. You are analyzing two companies that manutacture electronic toys-Lke Games Inc. and Our Play Inc. Like Games was iauhched eight years ago, whereas Cur Play is a relatuvely new company that has been in operation for anly 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.) Using this information, complete the following statements to indude in vour analysis. 1. A days of sales outstanding represents an efficient credit and collection polley. Between the two companies, is collecting cash from its customers faster than 2. Dut Play's foced assets turnower ravo is - but both companies are collecting their receivables less quilckly than the industry average. 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 3. tike Games's total assets turnover ratio is than the recorded cost of the Games's net foxed assets, total assets furnover ratio indicates greater efficiency. than the industry's average total assets tumover ratio. In general, a higher