Chauke Company had the following partial statement of financial position and complete statement of comprehensive income information for last year: The industry average DSO is 30 (360-day basis).Chauke 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 Chaukes' debt ratio (Total debt/Total assets) be after the change in DSO is reflected in the statement of financial position?

Question

Chauke Company had the following partial statement of financial position and complete statement of comprehensive income information for last year:  The industry average DSO is 30 (360-day basis).Chauke 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 Chaukes' debt ratio (Total debt/Total assets) be after the change in DSO is reflected in the statement of financial position?

Quizplus · Accepted Answer

The Answer of Chauke Company had the following partial statement of financial position and complete statement of comprehensive income information for last year:  The industry average DSO is 30 (360-day basis).Chauke 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 Chaukes' debt ratio (Total debt/Total assets) be after the change in DSO is reflected in the statement of financial position?

Chauke Company Had the Following Partial Statement of Financial Position