922 Words4 Pages

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 receivables? Assume there are 365 days in a year.
$20,000*20 days outstanding= AR $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?
Equity Multiplier= 2.5
Asset/Equity = 2.5/1 1+1.5= 2.5
Debt/Asset= 1.5/2.5= .6
3-3 Market/Book Ratio
Winston Washer’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?
75*800 million= $60 billion
Book Value= Assets- Liabilities
$10 billion in total assets- $4 billion in current liabilities and long-term debt= $6 billion in common equity
Market/Book Ratio= $60 billion/$6 billion= 10
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?
P/E Ratio= Price per share/Earnings per share
$3*$8= $24
The company has an EPS of $1.50 ($24/$1.50)= 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 its ROE?
ROE= profit margin*asset turnover*equity multiplier
Asset turnover 3%= sales $100 million/$50 assets=2 equity multiplier=2
3%*2*2=12
3-6 Du Pont Analysis
Donaldson & Son has and ROA of 10%, a 2% profit margin, and a return on equity equal to 15%. What is the company’s total assets turnover? What is the firm’s equity multiplier?
ROA= 10%; Profit Margin =2%; ROE= 15%
10/2= S/TA=5
15/10=

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