Format Window Help 5% MINDTAP Inc. and Our Play Inc. Like Games was launched egh

Question

Format Window Help 5% MINDTAP Inc. and Our Play Inc. Like Games was launched eght years past two years. However, both companies have an company data to compare Like Games and Our Play. Last year, the average You are analyzing two companies that manufacture electronic tays-Like Games ago, whereas Our Play is a relatively new company that has been in operation for only the pa ecual market share with sales of $500,000 each. You've colected sales for all Industry competitiors was $1,275,000. As an analyst, you want to make comments on in the coming year. You've colected data from the companies' financial statements. This information is listed as follows This information is listed as foilows: Data Collected (in dollars) Accounts receivable Net foxed assets Total assets Like Games 13,500 275,000 475,000 Our PlayIndustry Average 19,250 1,083,750 1,173,000 19,500 400,000 625,000 Using this information, complete the following statements to include in your analysis 1. A collecting cash from its customers faster than average days of sales outstanding represents an efficient credit and collection policy. Between the two companies, , but both companies are collecting their receivables less quickly than the industry 2. Our Play's foxed assets turnover ratio is than that of Like Games. This could be because Our Play is a relatively new company, so than the recorded cost of Like Games's net fixed assets the acquisition cost of its foxed assets is 3. Like Games's total assets turnover ratio is general, a higher total assets turnover ratio indicates greater eficiency , which is than the industry's average total assets turnover ratio. Ir Graded Continue without saving 13 esc

Explanation / Answer

1. A low days of sales outstanding represents an efficient credit and collection policy. Between the two companies Like Games is collecting cash from its customers faster than Our Play, but both the companies are collecting their receivables less quickly than the industry average.

2. Our Play’s fixed asset turnover ratio is less than that of Like Games. This could be because Our Play is a relatively new company, so the acquisition cost of its fixed assets is more than the recorded cost of Like games net fixed assets.

3. Like Games Total asset turnover ratio is 1.05, which is less than the industry average total asset turnover ratio. In general, a higher total asset turnover ratio indicates greater efficiency.

Like Games Our Play Industry Average Sales 500000 500000 1275000 Accounts Recievable 13500 19500 19250 Net fixed Assets 275000 400000 1083750 Total Assets 475000 625000 1173000 DSO =Accounts Recievable*365/Sales 9.86 14.24 5.51 Fixed Asset Turnover ratio = Sales/Fixed Assets 1.82 1.25 1.18 Total Asset Turnover ratio = Sales/Total Assets 1.05 0.80 1.09

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