Question
The following information is for SimClo Inc. Partial Balance Sheet: Cash 20 Accounts receivable 1,000 Inventories 2,000 Total current assets 3,020 Net fixed assets 2,980
The following information is for SimClo Inc. Partial Balance Sheet: Cash 20 Accounts receivable 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 8,000 EBIT 2,000 Interests 300 EBT 1,700 Taxes 680 Net Income 1,020 tax rate 40% Interests rate on outstanding debt 10% Industry measures: Days Sales Outstanding (DSO): 30 Inventory turnover: 6 SimClo Inc. plans to change its inventory policy so as to cause its inventory turnover to be equal to the industry average, and this change is expected to have no effect on either sales or cost of goods sold. If the cash generated from reducing inventories is used to retire debt (which was outstanding all last year), what will SimClo's new debt-to-assets ratio be after the change in inventory turnover is reflected in the balance sheet?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started