For number 1,2,3 you either fill the gap with Higher or Lower for all except the

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For number 1,2,3 you either fill the gap with Higher or Lower for all except the first blink has to be a number.

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Asset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has invested ina 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 Graham Pharmaceuticals has a quick ratio of 2.00x, $36,900 in cash, $20,500 in accounts receivable, some inventory, total current assets of $82,000, and total current liabilities of $28,700. The company reported annual sales of $600,000 in the most recent annual report. Over the past year, how often did Graham Pharmaceuticals sell and replace its inventory? 8.01x 2.86 x 26.83x 24.39x The inventory turnover ratio across companies in the pharmaceutical industry is 20.73x. Based on this information, which of the following statements is true for Graham Pharmaceuticals? Graham Pharmaceuticals is holding less inventory per dollar of sales compared to the industry average. Graham Pharmaceuticals 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 $600,000 each. You've collected company data to compare Like Games and Our Play. Last year, the average sales for all industry competitors was $1,530,000. 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: Data Collected (in dollars) Accounts receivable Net fixed assets Total assets Like Games 16,200 330,000 570,000 Our Play 23,400 480,000 750,000 Industry Average 23,100 1,300,500 1,407,600 Using this information, complete the following statements to include in your analysis. days of sales tied up in receivables, which is much than the industry average. It takes Our Play 1. Our Play has time to collect cash from its customers than it takes Like Games. than that of Our Play. This is because Like Games was formed eight years ago, so the 2. Like Games's fixed assets turnover ratio is 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 xed assets prices (not book values) rose over the past six years due to inflation, Our Play paid a assets amount for its fixed 1.09 of sales is being generated with every 3. The average total assets turnover in the electronic toys industry is 1.09, which means that dollar of investment in assets. A are total assets turnover ratio indicates greater efficiency. Both companies' total assets turnover ratios than the industry average.

Explanation / Answer

A. Graham Pharmaceuticals:

Answer: 24.39 x

Inventory turnover = Sales / Inventory.

Inventory = Total current assets - cash - accounts receivables = $ 82,000 - $ 36,900 - $ 20,500 = $ 24,600.

Inventory Turnover = $ 600,000 / $ 24,600 = 24.39 x

Graham Pharmaceuticals is holding less inventory per dollar of sales compared to the industry average.

B.1. Our Play has 14.23 days of sales tied up in receivables, which is much higher than the industry average. It takes Our Play higher time to collect cash from its customers than it takes Like Games.

2. Like Games fixed asset turnover ratio is higher than that of Our Play. This is because Like Games was formed eight years ago, so the acquisition cost of its fixed assets at historic values when the company its assets and has been depreciated since then. Assuming that fixed asset prices not book values rose over the past six years due to inflation, Our Play paid a higher amount for its fixed assets.

3. The average total asset turnover for the electronic toys industry is 1.09 x , which means that $ 1.09 of sales is being generated with every dollar of investment in assets. AA higher total assets turnover ratio indicates greater efficiency. Both companys' total asset turnover ratios are lower than the industry average.

Computations:

Ratio Computation Like Games Our Play Industry Average Days Sales Outstanding (365 / Sales) x Accounts Receivable 9.85 days 14.23 days 5.51 days Fixed Asset Turnover Ratio Sales / Net Fixed Assets 1.82 x 1.25 x 1.18 x Total Asset Turnover Ratio Sales / Total Assets 1.05 x 0.8 x 1.09 x

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