Homework Week#2 Fin515

In: Business and Management

Submitted By Carlosm
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(3-1) Days sales outstanding

Green 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?

Days of Sales Outstanding DSO= Receivables Average sales per day

20 days = Receivables Average sales per day Receivables= 20 days *$20,000
Receivables= $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
EM= Equity Multiplier EM= TOTAL ASSETS TOTAL EQUITY EM= 2.5 = 2.5 1
Assets = Equity + Liabilities Liabilities= Assets - equity Liabilities= 2.5 - 1 = 1.5 Debt ratio= Total liabilities = 1.5 = 0.6 = 60% Total assets 2.5

(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 to book ratio= Market value per share Book value per share Book value per share= Common Equity = $6 billion = $7.50 # shares $800 million Market to-book ratio= Market price per share = $75 = $10.00 Book value per share $7.50

(3-4) Price/Earning 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/ Earning Ratio = Price per share Earning per share Price cash flow ratio = price per share = cash flow per share Price per share = Price cash…...

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