Determine how the roe and roa would have been affected

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Reference no: EM131442417

Peterson's management has decided to reexamine the company's short-term credit policies. The chief financial officer estimates that reducing the receivables collection period to 78 days would result in a sales decrease of 3 percent. The purchasing department reports that by reducing the payables period to 68.5 days, discounts would be available that would reduce the cost of goods by 9 percent. Initially the cash required to finance these changes would come from additional long-term debt, resulting in a debt to equity ratio of 100 percent. As an analyst: a. Determine whether Peterson's Chemicals would have been profitable if management had made these changes at the beginning of 2000. b. Determine how the ROE and ROA would have been affected.

Reference no: EM131442417

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