After the change in dso is reflected in balance sheet

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Reference no: EM132056405

Collins Company had the following partial balance sheet and complete income statement information for last year: Balance Sheet: Cash $ 20 A/R 1,000 Inventories 2,000 Total current assets $3,020 Net fixed assets 2,980 Total assets $6,000 Income Statement: Sales $10,000 Cost of goods sold 9,200 EBIT $ 800 Interest (10%) 400 EBT $ 400 Taxes (40%) 160 Net Income $ 240 The industry average DSO is 30 (360-day basis). Collins plans to change its credit policy so as to cause its DSO to equal the industry average, and this change is expected to have no effect on either sales or cost of goods sold. If the cash generated from reducing receivables is used to retire debt (which was outstanding all last year and which has a 10% interest rate), what will Collins' debt ratio (Total debt/Total assets) be after the change in DSO is reflected in the balance sheet? a. 33.33% b. 45.28% c. 52.75% d. 60.00% e. 65.71%

Reference no: EM132056405

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