Niña Joy L. Arevalo BSMA II-B 3-1. Days Sales Outstanding

Niña Joy L.
Arevalo BSMA II-B
3-1. Days Sales Outstanding
Greene sisters has a DSO of 20 days. The companies’ average daily sales are $ 20, 000. What is the level
of it's account receivable? Assume there are 365 days in a year.
DSO = (Receivables) / (Average sales per day)
20 = R/ 20,000
R = 20 X 20,000 = $400,000
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 debt ration?
Debt Ratio = Debt to equity / (1+ Debt to equity) = 2.5/3.5 = 0.71 = 71%
3-3. Market/Book Ratio
Winston Washers's stock price is $75 per share. Winston has $10 billion in total assets. It's 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 = Common equity / Shares outstanding = 6/0.8 = $7.5
Market Book Ratio = Market price per share / Book value per share =75/7.5 = 10
3-5 Profit Margin of 3% and an Equity Multiplier of 2.0 Answer
Needham Pharmaceutals has a profit margin of 3% and an equity multiplier of 2.0. It's sales are $100
million and it has total assets of $50 million. What is it's ROE?
Ans.
ROE = Profit Margin * Total Assets Turnover * Equity Multiplier
ROE = (Net Income/Sales) *(Sales/Total Assets) *(Total Assets/Common Equity)
ROE = (3%) * (100/50) * 2=3% * 4 = 12%

3-7
Ace Industries has current assets equal to $3 million. The company's current ratio is 1.5, and it's quick
ratio is 1.0. What is the firm's level od current liabilities? What is the firm's level of inventories?
Current Assets = $3,000,000; Current Ratio = 1.5; Quick Ratio =1.0;
Current Liabilities = ?; Inventory = ?
CA =1.5
CL
$3,000,00 = 1.5
CL
1.5CL = $3,000,000
CL = $2,000,000
CA - Inv = 1.0
CL
$3,OOO,000 - Inv =1.0

$2,000,000
$3,000,000 - Inv = $2,000,000
Inv = $1,000,000.
3-12
1. The Kretovich Company had a quick ratio of 1.4, a current ratio of 3.0, an inventory turnover of 6
times, total current assets of $810,000, and cash and marketable securities of $120,000. What
were Kretovich's annual sales and it's DSO?
Answer:
Quick ratio = 1.4 Current ratio = 3.0 Inventory turnover = 6 times
Total Current assets = 810,000
Cash and marketable securities = 120,000
Current ratio = CA/CL Quick Ratio = QA / CL
3.0 = 810,000 /CL 1.4 = QA / 270,000
CL = 270,000 QA = 378,000
Inventory = CA – QA DSO = A/R Per day sales
810,000 - 378,000 = 432,000 =258,000 / 7,101.36 = 36.33 days
Inventory turnover = Sales / Inventory
6 = Sales/432,000
Sales = 2,592,000
Accounts Receivable = QA - Cash and market securities
378,000 - 120,000 = 258, 000

3-14
Jimenez Corporation
Balance Sheet
December 31,2020
Assets:
Cash P 72,000.00
Accounts Receivable 439,000.00
Total Current Assets 1,405,000.00
Fixed Assets 431,000.00
Total Assets P 1,836,000.00
Liabilities and Equity

Accounts Payable P 332,000.00
Notes Payable 100,000.00
Accruals 170,000.00
Total Current Liabilities P 602,000.00
Long-term Debt P 404,290.00

Common Stock 575,000.00
Retained Earnings 254,710.00
Total Liabilities and Equity P 1,836,000.00
Jimenez Corporation
Incomes Statement
December 2020
Sales P 4,290,000.00
Cost of Goods Sold 3,580,000.00
Selling, general and admin expenses 525,456.00
Earnings Before Taxes (EBT) 184,544.00
Interest Expense ( 40,000.00)
Earnings before taxes 144,544.00
Taxes (25%) ( 36,136.00)
Net Income P 108,408.00
Jimenez Corporation
Per Share Data for 2020
EPS 4.71
Cash Dividends per share 0.95
P/E Ratio 5.00
Market Price(Average) 23.57
Numbers of Shares Outstanding 23,000
Ratio Jimenez Industry Average

Quick Ratio 1.0
Current Ratio 2.7
Inventory Turnover 7.0
Days Sales Outstanding 32.0 days
Fixed Assets Turnover 13.0
Total Assets Turnover 2.6
Return on Assets 9.1%
Return on Equity 18.2%
Profit Margin on Sales 3.5%
Debt-to-Assets Ratio 21.0%
Liabilities-to-Assets Ratio 50.0%
P/E Ratio 6.0
Market/Book Ratio 3.5

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Niña Joy L.

Arevalo BSMA II-B

3-1. Days Sales Outstanding

DSO = (Receivables) / (Average sales per day)

3-2. Debt Ratio

3-3. Market/Book Ratio

3-5 Profit Margin of 3% and an Equity Multiplier of 2.0 Answer

ROE = Profit Margin * Total Assets Turnover * Equity Multiplier

ROE = (Net Income/Sales) *(Sales/Total Assets) *(Total Assets/Common Equity)

ROE = (3%) * (100/50) * 2=3% * 4 = 12%

Current Assets = $3,000,000; Current Ratio = 1.5; Quick Ratio =1.0;

Current Liabilities = ?; Inventory = ?

$3,OOO,000 - Inv =1.0

Quick ratio = 1.4 Current ratio = 3.0 Inventory turnover = 6 times

Total Current assets = 810,000

Cash and marketable securities = 120,000

Current ratio = CA/CL Quick Ratio = QA / CL

3.0 = 810,000 /CL 1.4 = QA / 270,000

Inventory = CA – QA DSO = A/R Per day sales

810,000 - 378,000 = 432,000 =258,000 / 7,101.36 = 36.33 days

Inventory turnover = Sales / Inventory

Accounts Receivable = QA - Cash and market securities

378,000 - 120,000 = 258, 000

Liabilities and Equity

Long-term Debt P 404,290.00

Ratio Jimenez Industry Average

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ROE = (Net Income/Sales) (Sales/Total Assets) (Total Assets/Common Equity)