Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Balance Sheet: Cash $20 A/R 1,000 Inventories 2,000 Total current assets $3,020 Net fixed assets 2,980 Total assets $6,000 Income Statement: Sales $10,000 Cost of

Balance Sheet:

Cash $20

A/R 1,000

Inventories 2,000

Total current assets $3,020

Net fixed assets 2,980

Total assets $6,000

Income Statement:

Sales $10,000

Cost of goods sold 9,000

EBIT $1,000

Interest (10%) 600

EBT $400

Taxes (40%) 160

Net Income $240

1. The industry average DSO is 18 (360-day basis). Collins plans to change its credit policy so as to cause its DSO to equal the industry average, and this change is expected to have no effect on either sales or cost of goods sold. How much cash can the company free up from reducing receivables?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Valuation Measuring and managing the values of companies

Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel

5th edition

978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470

More Books

Students also viewed these Finance questions

Question

Difference between truncate & delete

Answered: 1 week ago