7. (12.5 points) Use the following simplified 2013 balance sheet to show, in general terms,...
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7. (12.5 points) Use the following simplified 2013 balance sheet to show, in general terms, how an improvement in the DSO would tend to affect the stock price. For example, if the company could improve its collection procedures and thereby lower its DSO from 45.6 days to the 32-day industry average without affecting sales, how would that change "ripple through" the financial statements (shown in thousands below) and influence the stock price? $878 1,802 817 $3,497 Debt $1,545 Accounts receivable Other current assets Net fixed assets Total assets Equity Liabilities plus equity 1,952 $3,497 First, we need to calculate XYZ's daily sales Daily sales Sales Daily sales$7,035,600 / Daily sales$19,275.62 365 365 Target A/RDaily sales Target A/R-$19,276 Target A/R$616,820 Target DSo 32 Freed-up cash old A/R Freed-up cash -$878,000 Freed-up cash =$261,180 new A/R $616,820 8. (12.5 points) Provide a brief summary or rationale of how these ratios are used, and why they are important
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