293 Words2 Pages

FI 515 Homework week 2.
3-1 Days Sales Outstanding
Days sales outstanding= receivables/ave sales per day= receivables/annual sales/365)
20 days x $20,000= $400,000
3-2 Debt Ratio
Debt ratio formula=Debt ratio +equity ratio=1
Equity ratio = 1/EM….the equity multiplier is 2.5
1 / 2.5 = .40 equity ratio
Debt ratio= debt ratio +equity ratio=1
1-equity ratio=debt ratio
1-.40=.60%=debt ratio
3-3 Market/Book Ratio
Market value per share =$75
Common equity =6 billion
Number of shares outstanding =800M
Market value per share/ (common equity/# of shares outstanding)= market/book ratio
$75/(6,000,000/800,000,000) = $75/7.5
10 billion= market to book ratio
3-4 PE Ratio
Price per share/earnings per share= P/E
Price per share/cash flow per share= Price/cash flow*…show more content…*

Cash flow per share= $3.00 Price /cash flow ratio= 8.0 8.0 x 3.00 = $24.00 $24.00 / $1.50 = 16 (P/E) 3-5 ROE $100millions (sales) x 3% (profit margin) = $30 million (Net income) Net Income/assets= ROE $30 millions/$50 millions (total assets) = 6% 6% x 2.0 (equity multiplier) = 12% (ROE) 3-6 Du Pont Analysis ROA=10% Profit margin= 2% ROE= 15% ROA x Equity Multiplier= ROE (Profit Margin) (Total asset turnover)= ROA 10/2=5 (this is the firm’s total asset turnover) 15/10=1.5 (this is the firm’s equity multiplier) 3-7 Current and Quick Ratios Current assets= $3 million Current ratio= 1.5 Quick ratio= 1.0 Current assets/ Current liability= current ratio $3million/1.5= $2 million (level of current liability) Current Assets - Current Liability= Inventory $3millions – $2 millions = $1 million (level of

Cash flow per share= $3.00 Price /cash flow ratio= 8.0 8.0 x 3.00 = $24.00 $24.00 / $1.50 = 16 (P/E) 3-5 ROE $100millions (sales) x 3% (profit margin) = $30 million (Net income) Net Income/assets= ROE $30 millions/$50 millions (total assets) = 6% 6% x 2.0 (equity multiplier) = 12% (ROE) 3-6 Du Pont Analysis ROA=10% Profit margin= 2% ROE= 15% ROA x Equity Multiplier= ROE (Profit Margin) (Total asset turnover)= ROA 10/2=5 (this is the firm’s total asset turnover) 15/10=1.5 (this is the firm’s equity multiplier) 3-7 Current and Quick Ratios Current assets= $3 million Current ratio= 1.5 Quick ratio= 1.0 Current assets/ Current liability= current ratio $3million/1.5= $2 million (level of current liability) Current Assets - Current Liability= Inventory $3millions – $2 millions = $1 million (level of

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