RATIO ANALYSIS The following data apply to A.L. Kaiser & Company (millions of dollars):

Cash and equivalents $ 100.00 Fixed assets 283.50 Sales 1,000.00 Net income 50.00 Current liabilities 105.50 Notes payable to bank 20.00 Current ratio 3.00×

DSOa 40.55 days ROE 12.00%

aThis calculation is based on a 365-day year.

Kaiser has no preferred stock—only common equity, current liabilities, and long-term debt.

a. Find Kaiser’s (1) accounts receivable, (2) current assets, (3) total assets, (4) ROA,

(5) common equity, (6) quick ratio, and (7) long-term debt.

b. In Part

a, you should have found that Kaiser’s accounts receivable (A/R) = $111.1 million. If Kaiser could reduce its DSO from 40.55 days to 30.4 days while holding other things constant, how much cash would it generate? If this cash were used to buy back common stock (at book value), thus reducing common equity, how would this affect (1) the ROE, (2) the ROA, and (3) the total debt/total capital ratio?

AppendixLO1