Improving Financial Efficiency for Like Games Inc. and Our Play Inc.
What are the key efficiency metrics that can be used to analyze the financial performance of Like Games Inc. and Our Play Inc.? How do these companies compare to industry averages in terms of days of sales outstanding, fixed assets turnover ratio, and total assets turnover ratio?
Based on the data provided, we can analyze the financial performance of Like Games Inc. and Our Play Inc. using key efficiency metrics such as days of sales outstanding (DSO), fixed assets turnover ratio, and total assets turnover ratio. These metrics provide insights into how efficiently the companies are managing their operations and utilizing their assets. 1. Days of Sales Outstanding (DSO): Like Games Inc. has a lower DSO compared to Our Play Inc., indicating that it is collecting cash from its customers more efficiently. This suggests that Like Games may have better credit and collection policies in place. However, both companies have DSO figures that are higher than the industry average, meaning that they are taking longer to collect their receivables compared to industry norms. 2. Fixed Assets Turnover Ratio: Our Play Inc. has a lower fixed assets turnover ratio than Like Games Inc. This suggests that Our Play may not be utilizing its fixed assets as efficiently as Like Games. The lower turnover ratio for Our Play could be due to the higher acquisition cost of its fixed assets as a relatively new company. 3. Total Assets Turnover Ratio: Like Games Inc. has a total assets turnover ratio of 1.05x, which is lower than the industry average. A higher total assets turnover ratio is generally a sign of greater efficiency. Like Games' lower total assets turnover ratio indicates that it may not be using its total assets as efficiently as industry peers. Both companies are lagging behind industry averages in terms of DSO and total assets turnover, indicating room for improvement in their operational efficiency. Our Play's lower fixed assets turnover ratio can be attributed to its higher acquisition cost of fixed assets. To enhance financial performance in the coming year, both companies should focus on improving their efficiency metrics.