over the past year, how often did polk software Inc. sell and replace its invent
ID: 2816106 • Letter: O
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over the past year, how often did polk software Inc. sell and replace its inventory?
Polk Software Inc. has a quick ratio of 2.00x, $30,825 in cash, $17,125 in accounts receivable, some inventory, total current assets of $68,500, and total current liabilities of $23,975. The company reported annual sales of $200,000 in the most recent annual report. Over the past year, how often did Polk Software Inc. sell and replace its inventory? 8.01 9.73 10.70 x 2.86 > The inventory turnover ratio across companies in the software industry is 10.70x. Based on this information, which of the following statements is true for Polk Software Inc.? O Polk Software Inc. is holding more inventory per dollar of sales compared to the industry average O Polk Software Inc. 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 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 collected company data to compare Like Games and Our Play. Last year, the average sales for all industry competitors was $510,000. 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 5,400 110,000 190,000 Our Play 7,800 160,000 250,000 Industry Average 7,700 433,500 469,200 Using this information, complete the following statements to include in your analysis days of sales outstanding represents an efficient credit and collection policy. Between the two companies, IS collecting cash from its customers faster than average 2. Our Play's fixed assets turnover ratio is the acquisition cost of its fixed assets is 3. Like Games's total assets turnover ratio is general, a higher total assets turnover ratio indicates greater efficiency but both companies are collecting their receivables less quickly than the industry 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 which is than the industry's average total assets turnover ratio. IrnExplanation / Answer
1.) Over the past year, how often did Polk Software Inc sell and replace its inventory? Inventory = CA - Cash - A/R Inventory = $68,500 - $30,825 - $17,125 $20,550.00 Inventory Turnover Ratio = Sales/ Inventory Inventory Turnover Ratio = $200,000/$20,550 9.73 times b) Polk is holding more inventory per dollar of sales compared to the industry average Polk’s inventory turnover ratio is less than the industry's average inventory turnover ratio of 10.70x. This means that Polk is turning (selling and replacing) its inventory slower than the industry average. 2) Average collection period = (365 x Av. accounts receivables)/ Credit sales Our Play Av. collection period =365 x 7800/ $200,0000 0.00 days Like Games = 365 x 5400/$200,000 0.00 days Industry = 365 x 7700/$510,000 5.51 days A high 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 companies are collecting their receivables less quickly that the industry average. Asset turnover = Sales/ Total Assets Like Games = $200,000/$190,000 1.05 times Our Play = $200,000/$250,000 0.8 times Industry = $510,000/469200 1.09 times Our Play’s fixed assets turnover ratio is lower 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 higher than the recorded cost of Like Games’s net fixed assets. Like Games’s total assets turnover ratio is 1.05X, which is lower than the industry’s average total assets turnover ratio. In general, a higher total assets turnover ratio indicates greater efficiency.
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