DuPont Analysis You Are Considering Investing in Dakota's Security Services

question 60

Essay

DuPont Analysis You are considering investing in Dakota's Security Services.You have been able to locate the following information on the firm: total assets are $50 million,accounts receivable are $1 million,ACP is 15 days,net income is $1.5 million,and debt-to-equity is 2.1 times.All sales are on credit.Dakota's is considering loosening its credit policy such that ACP will increase to 20 days.The change is expected to increase credit sales by 5 percent.Any change in accounts receivable will be offset with a change in debt.No other balance sheet changes are expected.Dakota's profit margin will remain unchanged.How will this change in accounts receivable policy affect Dakota's net income,total asset turnover,equity multiplier,ROA,and ROE?

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Definitions:

Economic Indicators

Statistics and data metrics that provide insights into the economic performance of a country, leading to an understanding of its economic health and future direction.

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, as an indicator of inflation.

Yield To Maturity

The total return anticipated on a bond if the bond is held until it matures, considering all interest payments and its current price.

Forward Rate

The agreed-upon interest rate for a financial transaction that will take place in the future, mainly used in the context of currencies and bonds.