Which of the following is not an asset management ratio? A current ratio O A tot
ID: 2620864 • Letter: W
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Which of the following is not an asset management ratio? A current ratio O A total asset turnover ratio O A inventory turnover ratio 0 A fixed asset turnover ratio Johnny Appleseed Brewing Company (JABC) has a quick ratio of 2.00; $24,750 in cash; $13,750 in accounts receivable; some inventory, total current assets of $55,000; and total current liabilities of $19,250. In its most recent annual report, JABC reported annual sales of $500,000 and a cost of goods sold equal to 65% of annual sales. How many times is Johnny Appleseed Brewing Company (JABC) selling and replacing its inventory? O 0.35x O 30.30x O 19.70x O 21.67x The inventory turnover ratio across companies in JABC's industry is 16.75. Based on this information, which of the following statements is true for Johnny Appleseed Brewing Company (JABC)? O JABC is holding less inventory per dollar of COGS compared to the industry average. O Johnny Appleseed Brewing Company (JABC) is holding more inventory per dollar of COGS compared to the industry average. You are analyzing two companies that manufacture electronic toys-IntelliGames Inc. and BrainGames Inc. IntelliGames was launched eight years ago, whereas BrainGames is a relatively new company that has only been in operation for the past two years. However, both companies have an equal market share with sales of $500,000 each. You've gathered up company data to compare IntelliGames and BrainGames.Explanation / Answer
Which of the following is not an asset management ratio?
Answer: Current Ratio.
Johnny Appleseed Brewing Company:
How many times is JABC selling and replacing its inventory ?
Answer : 19.70 x
Inventory = Current Assets - Cash - Accounts Receivable = $ 55,000 - $ 24,750 - $ 13,750 = $ 16,500.
Cost of Goods Sold = $ 500,000 x 65 % = $ 325,000.
Inventory Turnover = $ 325,000 / $ 16,500 = 19.6970 x
The following statement is true:
JABC is holding less inventory per dollar of COGS compared to the industry average.
1. A lower days sales outstanding, or average collection period, represents an efficient credit and collection policy. Between the two companies IntelliGames Inc. is collecting cash from its customers faster than BrainGames Inc. , but both companies are collecting their receivables less quickly than the industry average.
2. BrainGames Inc.'s fixed asset turnover ratio is lower than that of IntelliGames Inc. This could be because BrainGames Inc. is a relatively new company, such that the acquisition costs and the book values of its fixed assets is higher than the acquisition costs and book values of IntelliGames net fixed assets.
3. IntelliGames' total asset turnover ratio is 1.05 x , which is lower than the industry's average total asset turnover ratio. In general, a higher total asset turnover ratio indicates greater efficiency.
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