357 Words2 Pages

Saheed Olagunju
Homework Wk2
FI515
Chapter
3-1
Days Sales Outstanding
Greene Sisters has a DSO of 20 days. The company’s average daily sales are $20,000. What is the level of its accounts receivable? Assume there are 365 days in a year. Answer
AR= 20x20000=400,000
3-2
Debt Ratio
Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Answer
Equity multiplier
Asset /equity = 2.5/1 A=L+E 2.5=1.5=+1
Debt/asset = 1.5/2.5 = .6
3-3
Market/Book Ratio
Winston Washers’s stock price is $75 per share. Winston has $10 billion in total as- sets. Its balance sheet shows $1 billion in current liabilities, $3 billion in long-term debt, and $6 billion in common equity. It has 800 million shares of common stock outstanding. What is Winston’s market/book ratio? Answer
Market value per share =$75
Common equity= 6,000,000
Number of share outstanding
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=800,000,000
Market to book ration = $75/(6,000,000/800,000,000)
6,000,000/800,000,000=.75
Market to book ration= 75/.75= 100
3-4
Price/Earnings Ratio
A company has an EPS of $1.50, a cash flow per share of $3.00, and a price/cash flow ratio of 8.0. What is its P/E ratio? Answer
Price /cash flow ratio= price per share/ cash flow per share
Price per share = $8 x $3 = $24
P.E = Price per share / EPS
P.E = $24 / 1.5 = 16
3-5
ROE
Needham Pharmaceuticals has a profit margin of 3% and an equity multiplier of 2.0. Its sales are $100 million and it has total assets of $50 million. What is ROE Answer
ROE= profit margin x asset turnover x equity multiplier
=3% asset turnover =

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