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

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
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?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Market value per share = $75 common equity = 6,000,000 number of shares outstanding = 800 millions shares
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

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.

Page1 / 6

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

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online