Answer:
Polk Software Inc.
Over the past year, Polk Software Inc. sold and replaced its inventory?
b. 4.57 x.
Based on this information, the true statement about Polk Software Inc. is:
B. Polk Software Inc. is holding less inventory per dollar of sales compared to the industry average.
Like Games Inc. and Our Play Inc. Like Games:
1. Our Play has_14_days of sales tied up in receivables, which is much_8__ than the industry average. It takes Our Play_1.4__times to collect cash from its customers than it takes Like Games.
2.Like Games's fixed assets turnover ratio is_0.57__than that of Our Play. This is because Like Games was formed eight years ago, so the 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 fixed assets prices (not book values) rose over the past six years due to inflation, Our Play paid a_less__amount for its fixed assets.
3. The average total assets turnover in the electronic toys industry is 1.09x, which means that $1.09 of sales is being generated with every dollar of investment in assets. A_more__total assets turnover ratio indicates greater efficiency. Both companies' total assets turnover ratios are_more__than the industry average.
Explanation:
a) Data and Calculations:
Quick ratio = 2.00x
Cash = $32,850
Accounts receivable = $18,250
Current assets = $73,000
Inventory = $21,900 ($73,000 - $32,850 + $18,250)
Current liabilities = $25,550
Cost of goods sold = $100,000
How often Polk Software Inc. sold and replaced its inventory = (Cost of goods sold/Average Inventory)
= 4.57 x ($100,000/$21,900)
Industry turnover ratio = 3.89x
Like Games Inc. and Our Play Inc. Like Games:
Sales for each firm last year = $100,000
Average sales for all industry competitors = $255,000
Information from the companies' financial statements:
Data Collected (in dollars)
Like Games Our Play Industry Average
Accounts receivable 2,700 3,900 3,850
Net fixed assets 55,000 80,000 216,750
Total assets 95,000 125,000 234,600
Days sales in inventory = Average accounts receivable/Sales * 365
For Our Play = $3,900/$100,000 * 365
= 14.235 days
Like Games = $2,700/$100,000 * 365
= 9.855 days
For the Industry = $3,850/$255,000 * 365
= 5.51 days
Fixed assets turnover:
Like Games Our Play Industry Average
Sales $100,000 $100,000 $255,000
Net fixed assets 55,000 80,000 216,750
= Sales/Net fixed assets 1.82 1.25 1.18
= $100,000/55,000 $100,000/$80,000 $255,000/$216,750
