d. Without income statement data, we cannot determine the aggressiveness or conservatism of the company's current asset financing policy.e. Without cash flow data, we cannot determine the aggressiveness or conservatism of the company's current asset financing policy.
2. Which of the following statements is CORRECT?
a. A firm that makes 90% of its sales on credit and 10% for cash is growing at aconstant rate of 10% annually. Such a firm will be able to keep its accountsreceivable at the current level, since the 10% cash sales can be used to financethe 10% growth rate.b. In managing a firm's accounts receivable, it is possible to increase credit salesper day yet still keep accounts receivable fairly steady, provided the firm canshorten the length of its collection period (its DSO) sufficiently.c. Because of the costs of granting credit, it is not possible for credit sales to bemore profitable than cash sales.d. Since receivables and payables both result from sales transactions, a firm witha high receivables-to-sales ratio must also have a high payables-to-sales ratio.e. Other things held constant, if a firm can shorten its DSO, this will lead to ahigher current ratio.
3. Halka Company is a no-growth firm. Its sales fluctuate seasonally,causing total assets to vary from $320,000 to $410,000, but fixed assetsremain constant at $260,000. If the firm follows a maturity matching (ormoderate) working capital financing policy, what is the most likely total oflong-term debt plus equity capital?
a. $260,642b. $274,360c. $288,800d. $304,000e. ) $320,000Lower total asset range $320,000Upper total asset range $410,000Minimum total + Min. CA = $320,000 = LT Debt + Equity