823 Words4 Pages

Problem 3-1:
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.
The Days Sales Outstanding: Receivable / Average sales per day
DSO= 20 days, Average daily sales = $20,000
Receivable
20 days= 20,000 Receivable = 20 x 20,000 = $400,000
Problem 3-2:
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?
Debt Ratio: Total liabilities / Total assets
Problem 3-3:
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? Common equity
Book value per share = shares outstanding = 6 billion 800 million = $7.5
Market / Book Ratio: Market price per share Book value per share
= 75 = 10 7.5
Problem 3-4:
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?
EPS= $1.5
Cash flow per share = $3 Price per share
Price/cash flow ratio = cash flow per share
Price per share 8.0 = $3
Price per share = $3 x 8.0 = $24 Price / earnings ratio: Price per share Earnings per share
P/ E Ratio= 24/ 1.5 = 16
Problem 3-5:
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?
Total assets turnover: sales / total

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