FI 515 WEEK 2

# FI 515 WEEK 2 - Problems (p.112) 3-1 Days Sales Outstanding...

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Problems (p.112) 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. DSO = days sales outstanding = receivables / average sales per day = Receivable / (annual sales / 365) 20 = receivables / 20,000 Receivables = 20 * 20,000 Receivables = 400,000 3-2 Debt Ratio Vigo Vacation 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 debit ratio? The equity multiplier is 2.5. This means that for every dollar of equity the company has \$2.5 of assets Equity Multiplier = 2.5 Therefore Equity Ratio = 1/EM Equity Ratio = 1/2.5 = 0.40 the formula is: Debt Ratio + Equity Ratio = 1 Therefore Debt Ratio = 1 - Equity Ratio = 1 - 0.40 = 0.60 or 60% 3-3 Market/Book Ratio Winston Washer’s stock 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?

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Market value per share = \$75 common equity = 6,000,000 number of shares outstanding = 800 millions shares
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## This note was uploaded on 04/07/2012 for the course ACC 515 taught by Professor Willaims during the Spring '12 term at Keller Graduate School of Management.

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FI 515 WEEK 2 - Problems (p.112) 3-1 Days Sales Outstanding...

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