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:

Invoice Payment

Invoice Payment refers to the process of paying off the amount owed for goods or services received, as documented by an invoice issued by the supplier or service provider.

Discount Period

The time period during which a payment can be made at a discounted rate before the full amount becomes due.

Credit for Returns

Refunds issued to customers or credits applied against customer accounts for returned goods or services.

Discount Period

The timeframe in which a buyer can pay less than the full invoice amount due to taking advantage of a sales discount offered by the seller for early payment.