Suppose that you are given the following data for Niles Company : Note: The data and calculations are based on a 365 -day year. The current ratio is equal to Cumentaruer + Camenf Liablities . Pluging in the relevant values for the current ratio and current. ilabilities, and then solving yields a current assets value of Adding fixed assets to current assets yields a value of total assets of The days sales outstending (0SO) ratio is equal to Pugging in the relevant values for the DSO ratio and sales; and then solving yielos an accounts recelvable balance of futurn on equity (ROE) is to Plugging in the relevant values for ROE and net income yiefds a value Return on equity (ROE) is to Plugging in the relevant values for ROE and net income yields a value of total common equity of approximately Recall that Total Ausets = Total Liabilities and Equity. Mathematically, total liabilities and equity is equal to - Plugging in the relevant values for total iabilities and equily, current liablities, and equity (caiculated using the previous identify) and then solving for long-term debt, yields a longterm debt of Return on assets (ROA) is equal to the product of profit margin multiplied by total assets turnove, which is equivalent to . Fugging in the relevant values for net income and total assets yields an ROA of approximately Recall the following identity: Current Ausets = Cash and equivalens + Accounts Recenable + inventorier The quick ratio is equal to E. Pugging in the relevant values for current assets, current liabilities, and inventories (carculated using the previous identity) ylelds a quick ratio of approximately Suppose that Niles could recuce its DSO from 18.25 to 12 . Given the formila for DSO from the video, as well as the same annual saies of $6,250,000, the new value accounts meceivable (associated with the new OSO) must be Given the formula for DSO from the video, as well as the same annual sales of $6,250,000, the new value accounts receivable (assoclated with the new OSO) must be , all else equal. The change (or the absolute value of the difference between the original and new values) in accounts recelvable represents an amount of approximately in cash generated. As a result of the stock buy back, the ROA and ROE both Suppose Niles uses the cash generated by the lower DSO to buy back common stock at book value, thus reducing common equity As a result of this new, lowee, DSO, total debt and total capital This means that the total debeftotal capital ratio must Step 3: Prectice: Ratio analysis Now it's time for you to practice whist you've learned, Suppose that you are given the following data for Niles Company: Note: The data and calculations are based on a 365 -day year. Given the formula for DSO from the video, as well as the same annual sales of $6,250,000, the new value accounts receivable (assoclated with the new OSO) must be , all else equal. The change (or the absolute value of the difference between the original and new values) in accounts recelvable represents an amount of approximately in cash generated. As a result of the stock buy back, the ROA and ROE both Suppose Niles uses the cash generated by the lower DSO to buy back common stock at book value, thus reducing common equity As a result of this new, lowee, DSO, total debt and total capital This means that the total debeftotal capital ratio must Step 3: Prectice: Ratio analysis Now it's time for you to practice whist you've learned, Suppose that you are given the following data for Niles Company: Note: The data and calculations are based on a 365 -day year. Now it's time for you to practice what you've learned. Suppose that you are given the following data for Niles Company: Note: The dota and calculations are based on a 365 -day year. Fill in the tabie with the appropriate values. (Hint: Use the formulos you loamad in the video and exercises in the previous atage of the problem.) Fill in the table with the appropriate values. (Hint: Use the formulas you learned in the video and exercises in the previous stage of the problem.) Hint: Recall that Current Assets = Cash and Equivalents + Accoionts Receable + inventories: Hint: fuecail that Total Limbiliries and Equify = Totol Assets. Long term debt is Suppose that Niles could reduce its DSO from 18,25 to -12, and wse the eash that was generated to buy back common stock at book value. Use the table to indicate the change in accounts recervible, ROA, ROE, and total debc/total capitar ratio
