You are analyzing two companies that manufacture electronic toys-Like Games In a
ID: 2741301 • Letter: Y
Question
You are analyzing two companies that manufacture electronic toys-Like Games In and Our Play In 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 $200, 000 each. You've gathered up company data to compare Like Games and Our Pay. Last year, the average sales for industry competitors was $510, 000. As an analyst, you want to make comments on the expend performance of these two companies in the coming year. You've collected data from the companies' financial statements. This information is listed as follows: Using this information, complete the follow statements to include in your analysis. A days of sales outstanding represents on efficient edit and collects policy Between the two companies, is collecting from Its customers faster then but both conics their less quick than the industry average. like Gomes's total assets turnover ratio is a higher total assets turnover ratio indicates greater efficiency.Explanation / Answer
1) All the answers you entered were right.
Clarification :1) A company which have low days of sales outstanding represents it is collecting cash from it's customers in a faster frequent period which means the company has a efficient credit and collection policy.
2) Since both companies have same sales but Like games Account receivables are lesser than the Ourplay Account receivables.It means Like games was collecting cash from it's customers in a very frequent and fast manner compared to Our play.
3) Our plays fixed assets turn over ratio (1.25%) is lower than Like games Fixed assets turn over ratio(1.818%).The main reason is may be the same reason given above.
4) Like games assets turnover ratio is (1.05 = 200000/190000) lower than the industry average total assets turnover ratio (1.087 = 510000/469200). A higher total assets turnover ratio indicates greater efficiency.
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