Question

	Carmax	AutoNation
Account receivable turnover	30.7	22.55
Inventory turnover	6.56	5.12
Fixed asset turnover	6.89	6.74

For each of the accounts receivable, inventory, and fixed asset turnover ratios, indicate whether the relative size of the ratios for the two firms contributes to (helps explain) the difference in the asset turnover ratio and the difference in the ROA.

To answer this question, you need to discuss the relationship of each of the accounts receivable, inventory, and fixed asset turnover ratios with both the asset turnover ratio and the ROA. This makes for a total of six combinations, all of which are listed below.

Your answers should take the following form where you list a firm in the first blank, a firm in the second blank, and either “helps explain” or “do not help explain” in the third blank.

The accounts receivable turnover ratio is larger for _______________. The asset turnover ratio is larger for _____________. The accounts receivable turnover ratios _____________ the difference in the asset turnover ratios.

The accounts receivable turnover ratio is larger for _______________. The ROA is larger for _____________. The accounts receivable turnover ratios _____________ the difference in the ROAs.

The inventory turnover ratio is larger for _______________. The asset turnover ratio is larger for _____________. The inventory turnover ratios _____________ the difference in the asset turnover ratios.

The inventory turnover ratio is larger for _______________. The ROA is larger for _____________. The inventory turnover ratios _____________ the difference in the ROAs.

The fixed asset turnover ratio is larger for _______________. The asset turnover ratio is larger for _____________. The fixed asset turnover ratios _____________ the difference in the asset turnover ratios.

The fixed asset turnover ratio is larger for _______________. The ROA is larger for _____________. The fixed asset turnover ratios _____________ the difference in the ROAs.

Answer 1

The accounts receivable turnover ratio is larger for Carmax. The asset turnover ratio is larger for Carmax. The accounts receivable turnover ratios helps explain the difference in the asset turnover ratios.

The accounts receivable turnover ratio is larger for Carmax. The ROA is larger for Carmax. The accounts receivable turnover ratios helps explain the difference in the ROAs.

The inventory turnover ratio is larger for Carmax. The asset turnover ratio is larger for Carmax. The inventory turnover ratios helps explain the difference in the asset turnover ratios.

The inventory turnover ratio is larger for Carmax. The ROA is larger for Carmax. The inventory turnover ratios helps explain the difference in the ROAs.

The fixed asset turnover ratio is larger for Carmax. The asset turnover ratio is larger for Carmax. The fixed asset turnover ratios helps explain the difference in the asset turnover ratios.

The fixed asset turnover ratio is larger for Carmax. The ROA is larger for Carmax. The fixed asset turnover ratios helps explain the difference in the ROAs.