Q. No. 5. The following data relates to Bright Star Company (millions of Rs.)
Cash & equivalents Rs 100.00
Fixed Assets 283.50
Sales 1000.00
Net Income 50.00
Current Liabilities 105.50
Current Ratio 3.00
Days Sales Outstanding (DSO) 40.55Days
Return on Equity 12.00%
The Company has no Preferred Stocks- only Common Equity, Current Liabilities, Long Term
Debt.
(a) Find the Company’s
(i) Accounts Receivable
(ii) Current Assets
(iii) Total Assets
(iv) Return on Total Assets
(v) Common Equity
(vi) Quick Ratio
(vii) Long term Debt
(b) In part a) you should have found that the Company’s Accounts Receivable (A/R) Rs. 111.1 million. If Bright Star Company reduces its DSO from 40.55 days to 30.4 days, while holding other things constant, how much cash would it generate?
Given Data Recap:
- Cash & Equivalents: Rs 100 million
- Fixed Assets: Rs 283.50 million
- Sales: Rs 1000 million
- Net Income: Rs 50 million
- Current Liabilities: Rs 105.50 million
- Current Ratio: 3.00
- Days Sales Outstanding (DSO): 40.55 days
- Return on Equity (ROE): 12.00%
The company has no preferred stocks, only common equity, current liabilities, and long-term debt.
Part (a): Calculations
Let’s calculate each requested item.
Summary:
- Accounts Receivable = Rs 111.1 million
- Current Assets = Rs 316.50 million
- Total Assets = Rs 600.00 million
- Return on Total Assets (ROA) = 8.33%
- Common Equity = Rs 416.67 million
- Quick Ratio = 2.00
- Long-Term Debt = Rs 77.83 million
- Cash Generated by Reducing DSO = Rs 27.81 million
