1. Baker Brothers has a DSO of 40 days.

The company's annual sales are

$7,300,000. (Assume there are 365 days in a year.) WHAT IS THE LEVEL OF
ITS ACCOUNTS RECEIVABLE?
DSO= AR / (S / 365)
40= AR/ (7300000 / 365)
AR= $800,000

2. Debt to capital ratio Bartley Barstools has a market/book ratio equal to 1. Its
stock price is $14 share and it has 5 million shares outstanding. The firm’s total
capital is $125 million and it finances with only debt and common equity. What is
its debt-to capital ratio?
Debt to capital ratio = Total debt/Total capital
Total capital = Total debt+ Total Equity
=> Debt to capital ratio = Total debt/ (Total debt+ Total Equity)
Total equity = price per share x the number of share
Total equity = $14 x 5 million= $70 million
Total debt =$125 million - $70 million = $ 55 million
Debt to capital ratio = 55/125=0.44 => 44%

3. Doublewide Dealers has an ROA of 10 percent, a 2 percent profit margin, and a

return on equity equal to 15 percent. WHAT IS THE COMPANY'S TOTAL
ASSETS TURNOVER? WHAT IS THE FIRM'S EQUITY MULTIPLIER?
ROA= 10%, PM= 2%, ROE= 15%
ROA= NI / TA, PM= NI / S, ROE= NI / E
ROA= PM * S/TA
10= 2 * TATO
TATO= 5
ROE= PM TATO EM
15= 2 5 EM
EM= 1.5

4. Jaster Jets, on the left side of the balance sheet has $10 billion in total assets.
The right side of its balance sheet consists of $1 billion in current liabilities, $3
billion in long-term debt, and $6 billion in common equity. The company has 800
million shares of common stock outstanding, and its stock price is $32 per share.
WHAT IS JASTER'S MARKET/BOOK RATIO?
TA= 1000000000, CL= 100000000, LT debt= 3000000000, CE= 6000000000, shares
outstanding= 800000000, P= 32
BV= CE / shares outstanding
= 6000000000 / 800000000= 7.5
MB= P / BV
= 32 / 7.5= 4.2667
 5. A company has an eps of $2.00, a book value per share of $20, and a
market/book ratio of 1.2x. what is its p/e?
EPS= 2, BVPS= 20, M/B= 1.2x
M/B= P / BVPS
1.2= P / 20
P= 24
P/E= 24/2= 12x

6. A firm has a profit margin of 2% and an equity multiplier of 2.0. It sales are $100
million and it has total assets of $50 million. What is its ROE?
PM= 2%, EM= 2, sales= $100 million, TA= $50 million
ROE= PM TATO EM
ROE= PM (sales / TA) EM
= 2 (100 / 50) 2= 8%

8. Ebersoll Mining has 6 million in sales, its ROE is 12%, and its total assets
turnover is 3.2x. the company is 50% equity financed. What is its net income?
TATO= sales / TA
3.2= 6000000 / TA
TA= 1875000
Equity= 1875000 * .5= 937500
ROE= (NI/S) TATO (TA/E)
.12= (NI / 6000000) 3.2 (1875000/937500)
.12= (NI / 6000000) * 6.4
NI= $112,500

9. Duval Manufacturing recently reported the following information. NI= 600000,

ROA= 8%, interest expense= 225000. Tax rate is 35%. What is BEP ratio?
ROA= NI / TA
.08= 600000 / TA
TA= 7500000
(EBIT - Interest)= NI / (1 - Tax Rate)
= 600000/ (1 - .35)= 923077
Tax= (EBIT - Interest) * Tax Rate
= 923077 * .35= 323077
NI= EBIT - Interest - Tax
600000= EBIT - 225000 - 323077
EBIT= 1148077
BEP= EBIT / TA
= 1148077 / 7500000= 15.31%

10. You are given the following information: Stockholders' equity = $3.75 billion;
price/earnings ratio = 3.5; common shares outstanding = 50 million; and
market/book ratio = 1.9. Calculate the price of a share of the company's
common stock.
MV= SE * MB
= 3750000000 * 1.9= 71250000000
MVPS= MV / shares
= 71250000000 / 50000000= $142.50