Question
Iggy's Igloos, Inc. is planning to reduce the number of days it takes the company to collect credit sales from 45 days to 30 days.
Iggy's Igloos, Inc. is planning to reduce the number of days it takes the company to collect credit sales from 45 days to 30 days. Iggy's Igloos believes that this policy change will have no effect on either sales or costs. Any asset changes resulting from this new policy will be offset by a corresponding and equal change in equity. All else constant, this new collection policy should be expected to: NOTE: Choose ALL that apply. This is an ALL or NOTHING question. You must select ALL correct answers, and only the correct answers, to receive any credit for this question.
Question 5 options:
1. Increase the firm's return on equity (assume that prior to this change, the company's ROE = 25%).
2. Increase the firm's inventory turnover ratio (assume that prior to this change, the inventory turnover ratio = 6.2).
3. Decrease the firm's current ratio (assume that prior to this change, the company's current ratio = 1.3).
4. Increase the firm's average collection period (assume that prior to this change, the company's average collection period = 30 days).
5. Decrease the firm's quick ratio (assume that prior to this change, the company's quick ratio = 0.8).
6. Decrease the firm's debt ratio (assume that prior to this change, the company's debt ratio = 40%).
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