The following data apply to A.L Kaiser & Company ($ million) :Cash and Equivalents $ 100.00Fixed Assets $ 283.50Sales $1,000.00Net Income $ 50.00Quick Ratio $ 2.0xCurrent Ratio 3.0xDSO 40.0 DaysROE 12.0%Kaiser has no preferred stock - Only common equity, current liabilities, and long-term debt.b. You should found Kaiser's accounts receivable (A/R) to be $111.1 million. If Kaiser could reduce its DSO from 40 days to 30 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) and thereby reduce the amount of common equity, how would this action affect the company's (1) ROE, (2) ROA, and (3) total deby/total assets ratio?

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Asked Jan 20, 2020
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The following data apply to A.L Kaiser & Company ($ million) :

Cash and Equivalents $ 100.00
Fixed Assets $ 283.50
Sales $1,000.00
Net Income $ 50.00
Quick Ratio $ 2.0x
Current Ratio 3.0x
DSO 40.0 Days
ROE 12.0%

Kaiser has no preferred stock - Only common equity, current liabilities, and long-term debt.

b. You should found Kaiser's accounts receivable (A/R) to be $111.1 million. If Kaiser could reduce its DSO from 40 days to 30 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) and thereby reduce the amount of common equity, how would this action affect the company's (1) ROE, (2) ROA, and (3) total deby/total assets ratio?

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Step 1

b.

Calculation of Cash Generated, ROE, ROA and Total Debt/Total Asset Ratio:

The cash generated is $28.91 million.

(1) The ROE is 12.89%.

(2) The ROA is 8.75%.

(3) The Total Debt/Total Asset Ratio is 0.32.

Excel Spreadsheet:

...
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