RATIO ANALYSIS The following data apply to A.L. Kaiser & Company (millions of dollars):Cash and equivalents $ 100.00Fixed assets 283.50Sales 1,000.00Net income 50.00Current liabilities 105.50Notes payable to bank 20.00Current ratio 3.003DSOa 40.55 daysROE 12.00%aThis calculation is based on a 365-day year.Kaiser has no preferred stock—only common equity, current liabilities, and long-term debt.a. Find Kaiser’s (1) accounts receivable, (2) current assets, (3) total assets, (4) ROA, (5)common equity, (6) quick ratio, and (7) long-term debt.b. In part a, you should have found that Kaiser’s accounts receivable (AyR) 5 $111.1 mil-lion. If Kaiser could reduce its DSO from 40.55 days to 30.4 days while holding otherthings constant, how much cash would it generate? If this cash were used to buy backcommon stock (at book value), thus reducing common equity, how would this affect(1) the ROE, (2) the ROA, and (3) the total debt/total capital ratio?
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