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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. DSO = A/R / Daily Sales 20 = A/R / 20,000 A/R = $40,000

(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 debtratio? Equity Ratio = 1 / Equity Multiplier ER = 1 / 2.5 ER = 0.4 * 100 = 40% Debt Ratio = 100% - ER DR = 100% - 60% DR = 40%

(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 Cap = 75 * 800 million = 60 billion Book value = Assets - Liabilities BV = 10 – 4 BV = 6 billion Market / Book ratio = 60 / 6 = 10

(3-4)

Price/Earnings Ratio

0. Its sales are $100 million and it has total assets of $50 million. and a return on equity equal to 15%. a cash flow per share of $3.50. What is its ROE? Profit margin = 3% Asset turn over = Sales/ total assets = 100/50 = 2 Equity multiplier = 2 ROE = Profit margin * Total assets turnover * Equity multiplier ROE= 2 x 2 x 3 % = 12 % (3-6) Du Pont Analysis Donaldson & Son has an ROA of 10%.0. The company’s current ratio is 1.50 P/E Ratio = 16 (3-5) ROE Needham Pharmaceuticals has a profit margin of 3% and an equity multiplier of 2.00. a 2% profit margin.5. and a price/cash flow ratio of 8. What is the company’s total assets turnover? What is the firm’s equity multiplier? ROE = ROA * Equity Multiplier 15 = 10 * Equity Multiplier Equity Multiplier = 15/10 = 1.5 ROA = Profit Margin * Total Asset Turnover 10 = 2 * Total Asset Turnover Total Asset Turnover = 10/2 = 5 (3-7) Current and Quick Ratios Ace Industries has current assets equal to $3 million. What is the firm’s level of current liabilities? What is the firm’s level of inventories? .A company has an EPS of $1. and its quick ratio is 1.0. What is its P/E ratio? PPS = Price / Cash flow ratio * Cash flow /share PPS = 8 * 3 PPS = $24 P/e Ratio = Share price / EPS = 24 / 1.

000 * 10% = 11. how much will be in your account after 5 years? PV = 10.25842 * 5000 = 1292. 5-year ordinary annuity that pays $300 each year? If this were an annuity due.Current Ratio = Current Assets / Current Liabilities 1.2584.000 in a bank account that pays 10% interest annually. what would its future value be? Using the TVM table.5 = 3 million / Current Liabilities Current Liabilities = 3/1. 0.07 = $1846 . FV = 300 * 5. we discount one period back so FV = 1725 * 1.5 = 2 million Quick Ratio = Current Assets – Inventory / Current Liabilities 1 = 3million – Inventory / 2 million Inventory = 1 million 4-1 Future Value of a Single Payment If you deposit $10.10 (4-6) Future Value: ordinary Annuity versus Annuity Due What is the future value of a 7%. Year 1: 10.000 * 10% = 12.100 (Repeat method for 5 years) 4-2 Present Value of a Single Payment What is the present value of a security that will pay $5.10 (Calculated in excel with FV formula).000 in 20 years if securities of equal risk pay 7% annually? Per the TVM table.000 Year 2: 11.75074 = $1725 If it was an annuity due.000 I = 10% N=5 FV = 16.105. the factor for 7% and 20 periods is 0.

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