Zebra engineering corp. has a quick ratio of 2.00x, $28,125 in cash, $15,625 in
ID: 2383588 • Letter: Z
Question
Zebra engineering corp. has a quick ratio of 2.00x, $28,125 in cash, $15,625 in accounts receivable, some inventory, total current assets of $62,500 and total current liabilities of $21,875. The company reported annual sales of $100,000 in the most recent annual report.
Over the past year, how often did Zebra Engineering Corp. sell and replace its inventory?
a. 0.39
b. 5.33
c. 5.86
d. 0.35
The inventory turnover ratio across companies in the industry is 4.53x. Based on this information, which of the following statements is TRUE about Zebra engineering corp?
a. Zebra engineering corp is holding more inventory per dollar of sales compared to the industry average
b. Zebra engineering corp. 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 8 years ago, whereas Our Play is a new company that has been in operations for only the past two years. However, both companies have equal market share with sales of $100,000 each. Youve gathered up company data to compare Like Games and Our Play. Last year, the average sales for industry compeitiors was $255,000. As an analyst, you want to make comments on the expected performance in the coming year. Youve collected data from the companies' financial statements. This information is listed as following:
Like Games/Our Play/Industry Average
A/R: 2,700/3,900/3,850
Net Fixed Assets: 55,000/80,000/216,750
Total Assets: 95,000/125,000/234,600
Using this info, complete the following statements to include in your analysis
1. Our Play has____ days of sales tied up in receivables, which is much ____ than the industry average. It takes Our Play____ time to collect cash from its customers than it takes Like Games.
2. Like Games's fixed asset 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 a historic values when the company bought its assets and has been depreciated since then.
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 asset turnover ratio are ____ than the industry average.
Explanation / Answer
2.
Correct Option is (b)
b. Zebra engineering corp. is holding less inventory per dollar of sales compared to the industry average
Justification: Higher the Inventory turnover ratio, higher is the liquidity of the inventory. When comparing Zebra engineering corp inventory ratio with industry standards then Option b seems to correct.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.