Question (3-1) Days Sales Outstanding (3-2)

(3-1)
Days Sales Outstanding
(3-2)
Debt Ratio
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 debtratio?
(3-3)
Market/Book Ratio
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?
(3-4)
Price/Earnings Ratio
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?
(3-5)
ROE
Needham Pharmaceuticals has a profit margin of 3% and an equity multiplier of 2.0. Its sales are
$100 million and it has total assets of $50 million. What is its ROE?
(3-6)
Du Pont Analysis
Donaldson & Son has an ROA of 10%, a 2% profit margin, and a return on equity equal to 15%.
What is the company’s total assets turnover? What is the firm’s equity multiplier?

(3-7)
Current and Quick Ratios
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 firm’s level of
inventories?
Problems (pp. 165-167)
4-1 FV of Single Amount
If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in
your account after 5 years?
4-2 PV of Single Amount
What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk
pay 7% annually?
4-6 FV of Ordinary Annuity
What is the future value of a 7%, 5-year ordinary annuity that pays $300 each year? If this were
an annuity due, what would its future value be?
4-14 PV Uneven Cash Flow Stream
Find the present values of the following cash flow streams. The appropriate interest rate is 8%.
(Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if
you have a financial calculator, read the section of the manual that describes how to enter cash
flows such as the ones in this problem. This will take a little time, but the investment will pay
huge dividends throughout the course. Note that, when working with the calculator’s cash flow
register, you must enter CF0 = 0. Note also that it is quite easy to work the problem with Excel,
using procedures described in the Chapter 4 Tool Kit.)
Year Cash Stream A Cash Stream B
1 $100 $300
2 400 400
3 400 400
4 400 400
5 300 100
b. What is the value of each cash flow stream at a 0% interest rate?