The following data apply to Mendoza & Co. (millions of dollars):
Cash and Equivalents $100.00
Fixed assets 283.50
Sales 1,000.00
Net income 50.00
Current liabilities 105.50
Current ratio 3.00
DSOa 40.55 days
ROE 12.00%
This calcualtion is based on a 365-day year. Mendoza has no preferred stock..only common equity, current liabilities, and long-term debt.
a) Find Mendoza'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 Mendoza's accounts receivable (A/R) 1/4 $111.1 million. If Mendoza's could reduce its DSO from 40.55 days to 30.4 days while holding othere things constant, how much cash would it generate? If this cash were used to buy back common stock (at book value), thus reducing common equity, how would this affect (1.) the ROE, (2.) ROA, and (3.) the total debt/total assets ratio?