The following data apply to A.L. Kaiser & Company (millions of dollars):
|
Cash and marketable securities
|
$100.00
|
|
Fixed assets
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$283.50
|
|
Sales
|
$1,000.00
|
|
Net income
|
$50.00
|
|
Quick ratio
|
2.0X
|
|
Current ratio
|
3.0X
|
|
DSO
|
40.55 days
|
|
ROE
|
12%
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Kaiser has no preferred stock-only common equity, current liabilities, and long-term debt.
a. Find Kaiser"s (1) accounts receivable (A/R), (2) current liabilities, (3) current assets, (4) total assets, (5) ROA, (6) common equity, and (7) long-term debt.
b. In part a, you should have found Kaiser"s accounts receivable (A/R) = $111.1 million. If Kaiser could reduce its DSO from 40.55 days to 30.4 days while holding other things constant, how much cash would it generate? If this cash were used to buy back common stock (at book value), thus reducing the amount of common equity, how would this affect (1) the ROE, (2) the ROA, and (3) the total debt/total assets ratio?