Question
You are considering investing in Dakotas Security Services. You have been able to locate the following information on the firm: Total assets are $33.9 million,
You are considering investing in Dakotas Security Services. You have been able to locate the following information on the firm: Total assets are $33.9 million, accounts receivable are $4.59 million, ACP is 25 days, net income is $4.80 million, and debt-to-equity is 1.2 times. All sales are on credit. Dakotas is considering loosening its credit policy such that ACP will increase to 30 days. The change is expected to increase credit sales by 5 percent. Any change in accounts receivable will be offset with a change in debt. No other balance sheet changes are expected. Dakotas profit margin will remain unchanged. |
How will this change in accounts receivable policy affect Dakotas net income, total asset turnover, equity multiplier, ROA, and ROE? (Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 2 decimal places and other answers to 2 decimal places. Use 365 days a year.) |
Net income | $ | m | (Click to select)increasesdecreases |
Total asset turnover | times | (Click to select)fasterslower | |
Equity multiplier | times | (Click to select)moreless | |
ROA | % | (Click to select)increasesdecreases | |
ROE | % | (Click to select)increasesdecreases | |
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