Question 1. The following data ($ in millions) apply to the Maryland Manufacturing Company:
| Cash and Marketable Securities |
|
|
$ 1,400.00 |
| Fixed assets |
|
|
|
$ 2,400.00 |
| Accounts receivable |
|
|
|
$ 1,196.00 |
| Net income |
|
|
|
$ 600.00 |
| Current liabilities |
|
|
|
$ 4,000.00 |
| Current ratio |
|
|
|
2.5 |
| Days Sales Outstanding (DSO) using a 365 day year |
|
40 |
| Return on equity (ROE) |
|
|
|
8% |
a) Find the Maryland Manufacturing Company's (1) sales, (2) current assets, (3) total assets, (4) return on assets, (5) common equity, and (6) long-term debt.
b) If SJB Manufacturing could reduce its DSO to 30 days, while holding all other accounts constant, how much cash would it generate? If this cash were used to buy back common stock at book value thus reducing the amount of common equity, how would this affect the ROE, ROA, and total debt/total assets ratio?