# Exercies-Week 2 Assgnt

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Week 2 Assignments

Alexandra

Chapter 3

3-1. Greene sisters has a DSO of 20 years. 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.

Day sales outstanding= receivables/average sales per day

AR= 20x20,000= \$400,000

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

Debt ratio+ equity ratio= 1

Debt ratio= 1-0.40= 0.60

3-3. Winston Washer’s stock price 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?

Market-to-book ratio = market value per share/(common equity/number of shares outstanding)

Market-to-book ratio = \$75/(6,000,000/800,000,000)

Market-to-book ratio = \$75/(6,000,000/800,000,000)

market-to-book ratio = \$75/7.5

market-to-book ratio = 10

Winston Washer’s market-to-book ratio is 10.

3-5. 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?

Price per share = \$8 x \$3 = \$24

P.E = \$24 / 1.5 = 16

3-6. Donaldson & Son has an ROA of 10%, a 2% profit margin, and return on equity equal to 15%. What is the company’s total assets turnover? What is the firm’s equity multiplier?

Asset turnover= ROE/ profit margin

Asset turnover= 10%/ 2% = 5

ROE = (Profit margin) (Total assets turnover) (Equity multiplier)

Equity multiplier = ROE/ profit margin X asset turn over

Equity multiplier = 15 % / 5x 2 % = 1.5

3-7. Ace Industries has current assets equal to \$3million. The company’s current ratio is 1.5, and its quick ratio is 1.0. What is the firm’s level of current liabilities? What is the firm’s...