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provided the firm can shorten 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 be more profitable than cash sales.
d. Since receivables and payables both result from sales transactions, a
firm with a 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 a higher 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 assets
remain constant at $260,000. If the firm follows a maturity matching (or
moderate) working capital financing policy, what is the most likely total
of long-term debt plus equity capital?
a. $260,642
b. $274,360
c. $288,800