Fi515 Week 2 Homework Problems

In: Business and Management

Submitted By shay72002
Words 976
Pages 4
Easy Problems 1-5
(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.

DSO= 20; Average Daily Sales= 20,000
20 = A/R / 20,000
20 x 20,000= A/R
400,000 = A/R
(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 debtratio? Equity Multiplier= 2.5
Equity Ratio= 1/EM
1 / 2.5= .40
Debt Ratio + Equity Ratio= 1
Therefore Debt Ratio= 1-Equity Ratio= 1- 0.40 = .60%
(3-3)
Market/Book Ratio
Winston Washers’s stock price is $75 per share. Winston has $10 billion in total assets. 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?
Market Value per share= 75; Common Equity= 6,000,000; Number of shares outstanding= 800 million

Market-to-book ratio = market value per share/(common equity/number of shares outstanding)
Market-to-book ratio = $75/(6,000,000/800,000,000)
= $75/7.5
= 10 market-to-book ratio
(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?

Price per share = $8 x $3 = $24
P/E = $24 / 1.5 = 16 P/E ratio
(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 its ROE?

Or, ROE= profit margin x asset turnover x equity multiplier
=3% asset turnover = sales/asset = 50/100= 2 equity multiplier= 2
ROE= 3% x2 x2= 12%

Intermediate Problems 6-10
(3-6)
Du Pont Analysis
Donaldson & Son has an…...

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