Managerial Finance
Week 2 assignment
03/13/2011

(3-1)
DSO = (A/R) / (Annual sales)/365)
(A/R)= (DSO) X (Annual sales)/365) = 20,000X20 = 400,000
(3-2)
The company’s debt ratio = 1- (1/equity multiplier) = 1- (1 / 2.5) = 1- 0.4 = 0.60 = 60%
(3-3)
The market price for the shares = $75.00 x 800 Millions = 60 Billions
The book value for the share’s price = 6 Billion/800 = 7.5
The Winston’s market/book ratio = 75/7.5 = 10
(3-4)
The EPS = $1.50, cash flow per share = $3.00, price/cash flow ratio = 8.0.
The price of the share = 8 x 3 = 24.
P/E ratio = 24/1.5 = 16.
(3-5)
ROE = Profit Margin x TA Turnover x Equity Multiplier TA Turnover = Sales/Total Assets = 100 Million / 50 Million = 2
ROE = 3% X 2 X 2.0 = 12%
(3-6)
A. ROA = NI/Total Assets, ROE = NI/Common Equity, NI = ROE x Common Equity ROA = ROE x Common Equity/Total assets, 10%/15% = Common Equity/Total assets Common Equity/Total assets = 1/Equity Multiplier, Equity Multiplier = 1/(10%/15%) = 1.5
B. Profit margin x TA turnover x Equity Multiplier = ROE
TA turnover = ROE/ (profit margin x equity multiplier) = 15%/ (2% x 1.5) = 5

(3-7)
Current ratio = current assets/current liabilities.
Current liabilities = current assets/current ratio = 3,000,000/1.5 = 2,000,000.
Quick ratio = (Current assets – inventory)/current liability.
Quick ratio x current liabilities = current assets – inventory.
Inventory = current assets – (quick ratio x current liabilities) = 3,000,000 – (1 x 2,000,000) =