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CHAPTER 3-4 - Market-to-book ratio = Share price BVPS = $63...

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Market-to-book ratio = Share price / BVPS = $63 / $25.24 = 2.50 times P/E ratio = Share price / EPS = $63 / $2.88 = 21.87 times Sales per share = Sales / Shares = $4,500,000 / 210,000 = $21.43 P/S ratio = Share price / Sales per share = $63 / $21.43 = 2.94 times 7. ROE = (PM)(TAT)(EM) ROE = (.055)(1.15)(2.80) = .1771 or 17.71% 8. This question gives all of the necessary ratios for the DuPont Identity except the equity multiplier, so, using the DuPont Identity: ROE = (PM)(TAT)(EM) ROE = .1827 = (.068)(1.95)(EM) EM = .1827 / (.068)(1.95) = 1.38 D/E = EM – 1 = 1.38 – 1 = 0.38 9. Decrease in inventory is a source of cash Decrease in accounts payable is a use of cash Increase in notes payable is a source of cash Increase in accounts receivable is a use of cash Changes in cash = sources – uses = $375 – 190 + 210 – 105 = $290 Cash increased by $290 10. Payables turnover = COGS / Accounts payable Payables turnover = $28,384 / $6,105 = 4.65 times Days’ sales in payables = 365 days / Payables turnover Days’ sales in payables = 365 / 4.65 = 78.51 days The company left its bills to suppliers outstanding for 78.51 days on average. A large value for
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  • Spring '08
  • spurlin
  • Financial Ratio, Generally Accepted Accounting Principles, share price, DuPont Identity, Payables Turnover

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