Collins Company Had the Following Partial Balance Sheet and Complete

question 11

Multiple Choice

Collins Company had the following partial balance sheet and complete income statement information for 2010: 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%

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Definitions:

Economies of Scales

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Restructuring

The process of restructuring a company's legal, ownership, operational, or other configurations to enhance its profitability or to better suit its current requirements.

Termination

involves the formal process of ending the employment or contractual relationship with an individual or entity, often due to performance issues, restructuring, or economic constraints.

Strategic Benefits

The long-term advantages an organization gains from implementing certain actions, policies, or investments, contributing to its overall objectives.