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Week Three Finance

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FIN 612 Managerial Finance
Week Three Assignment

Your assignment for this week is to complete the following questions and problems from Chapter 3. Please submit your complete assignment in the course room by the due date.

Chapter 3 Questions

(3-3) Over the past year, M. D. Ryngaert & Co. has realized an increase in its current ratio and a drop in its total assets turnover ratio. However, the company’s sales, quick ratio, and fixed assets turnover ratio have remained constant. What explains these changes?

(3-5) How might (a) seasonal factors and (b) different growth rates distort a comparative ratio analysis? Give some examples. How might these problems be alleviated?

(3-6) Why is it sometimes misleading to compare a company’s financial ratios with those of other firms that operate in the same industry?

Chapter 3 Problems

(3-1) 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=ar/daily sales
20=ar/20,000
Accounts Receivable= $400,000

(3-2) Vigo Vacations has $200 million in total assets, $5 million in notes payable, and $25 million in long-term debt. What is the debt ratio?
Equity ratio= (1/2.5)= .4
Debt ratio= 1-.4= 60%

(3-3) Winston Washers’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?
Book value per share = $6 billion/$800 million= $7.5
Market/book ratio = $75/$7.5= 10

(3-7) Ace Industries has current assets equal to $3 million. 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

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