# Fi515 Homework 2 Essay

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.

The Days Sales Outstanding: Receivable / Average sales per day

DSO= 20 days, Average daily sales = $20,000

Receivable

20 days= 20,000 Receivable = 20 x 20,000 = $400,000

Problem 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?

Debt Ratio: Total liabilities / Total assets

Problem 3-3:

Winston Washers’s stock price is $75 per share. Winston has $10 billion in total as- sets. Its balance sheet shows

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ROA = Profit margin x Total assets turnover

10% = 2% x Total assets turnover

Total assets turnover = 10 / 2 = 5

ROE = ROA x Equity multiplier

15% = 10% x Equity multiplier

Equity multiplier = 15 / 10 = 1.5

Problem 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 firm’s level of inventories? Current assets

Current Ratio = current liabilities

1.5 = 3,000,000 Current liabilities

Current liabilities = 2 million

Current assets - Inventories

Quick ratio = Current liabilities

3,000,000- Inventories 1.0 = 2,000,000

Inventories = 1 million

Problem 4-1:

If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in your account after 5 years?

PV= 10,000

I= 10%

N= 5

PMT= 0

FV= 16,105.10

Problem 4-2:

What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk pay 7% annually?

N= 20

FV= 5,000

I= 7%

PMT=0

PV = 1,292.09