FI515_Homework2_BrianLin - Brian Lin D01278742 Week 2...

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Brian Lin D01278742 Week 2 Homework Chapter 3 Homework Question 3-1: Greene Sisters has a DSO of 20 Days. The company’s average daily sales are $20,000. What is the level of accounts receivable? Assume there are 365 days in a year. DSO = 20 Days DSO = Receivables/Average Sales per Day 20 = Receivables/20,000 Receivables = 400,000 Question 3-2: 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? Equity Multiplier = 2.5 Equity Ratio = 1/Equity Multiplier Equity Ratio = 0.40 Assets/Equity = Equity Multiplier Debt Ratio = (Assets-Equity)/Assets = 1 – (1/(A/E)) Debt Ratio + Equity Ratio = 1 Debt Ratio + 0.40 = 1 Debt Ratio = 0.60 Question 3-3: Winston Washer’s stock price is $75/share. Winston has $10B in total assets. Its balance sheet shows $1B in current liabilities, $3B in long-term debt and $6B in common equity. It has 800M shares of common stock outstanding. What is Winston’s market/book ratio?
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