Fi 515 Essay

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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 =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 = sales/asset = 50/100= 2 equity multiplier=2 ROE= 3% x2 x2= 12% 3-6 Du Pont Analysis Donaldson & Son has an ROA of 10%, a 2% profit margin, and a return on equity equal to 15%. What is the

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