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The Lumber Company had the following balance sheet and incom…

Posted byAnonymous August 18, 2021January 3, 2024

Questions

The Lumber Cоmpаny hаd the fоllоwing bаlance sheet and income statement information. Balance  Sheet on December 2019: Cash $   120 A/R 900 Inventories 4,000 Total CA $5,020 Debt $3,000 Net Fixed Asset 2,980 Equity 5,000 Total Assets $8,000 Total Liability & Equity $8,000 Income Statement during 2019: Sales $10,800 Cost of goods sold 10,000 EBIT $        800 Interest (12%) 360 EBT $       440 Taxes (%40) 176 Net Income $        264 The industry days sales outstanding (DSO) is 16.  If management can improve the credit department and collection procedure sufficiently to reduce DSO to the industry average (16), how much cash could be freed up?  Assume that the sales level will remain constant. [DSO=AR/ (Annual Sales/360)]

The Lumber Cоmpаny hаd the fоllоwing bаlance sheet and income statement information. Balance  Sheet on December 2019: Cash $   120 A/R 900 Inventories 4,000 Total CA $5,020 Debt $3,000 Net Fixed Asset 2,980 Equity 5,000 Total Assets $8,000 Total Liability & Equity $8,000 Income Statement during 2019: Sales $10,800 Cost of goods sold 10,000 EBIT $        800 Interest (12%) 360 EBT $       440 Taxes (%40) 176 Net Income $        264 The industry days sales outstanding (DSO) is 16.  If management can improve the credit department and collection procedure sufficiently to reduce DSO to the industry average (16), how much cash could be freed up?  Assume that the sales level will remain constant. [DSO=AR/ (Annual Sales/360)]

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