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FI515_Homework2_karriemchugh

# FI515_Homework2_karriemchugh - Homework Questions(3-1 Days...

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Homework Questions (3-1) 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. AR= 20 x 20,000= \$440,000 (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? Equity Multiplier= 2.5 Equity ratio= 1/EM Equity Ratio= 1/ 2.5 =0.40 Debt ratio + Equity ratio= 1 DR= 1-ER= 1- 0.40= 0.60 DR= 60% (3-3) Market/book ratio Winston Washers’s stock price is \$75 per share. Winston has \$10 billion in total as- sets. 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 value per share = \$75 Common equity= 6,000,000 Number of Shares outstanding= 800,000,000 Market/book ratio= \$75/(6,000,000/800,000,000) Market/book ratio= \$75/7.5 Market/book ratio= 10 (3-4) Price/Earnings 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?

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FI515_Homework2_karriemchugh - Homework Questions(3-1 Days...

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