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    Fin Man HW1

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    1. Baker Brothers has accounts receivable of $800,000 based on its $7.3 million in annual sales and 40 day DSO. 2. Bartley Barstools has a debt-to-capital ratio of 44% based on its $125 million in total capital consisting of $55 million in debt and $70 million in equity from its $14 stock price and 5 million shares outstanding. 3. Doublewide Dealers has a total asset turnover of 5 times and an equity multiplier of 1.5, given its 10% ROA, 2% profit margin, and 15% ROE.

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    Fin Man HW1

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    Kingkong
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    1. Baker Brothers has accounts receivable of $800,000 based on its $7.3 million in annual sales and 40 day DSO. 2. Bartley Barstools has a debt-to-capital ratio of 44% based on its $125 million in total capital consisting of $55 million in debt and $70 million in equity from its $14 stock price and 5 million shares outstanding. 3. Doublewide Dealers has a total asset turnover of 5 times and an equity multiplier of 1.5, given its 10% ROA, 2% profit margin, and 15% ROE.

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    Financial Managements Sample Problems

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    Fin-Man-HW1

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    1. Baker Brothers has accounts receivable of $800,000 based on its $7.3 million in annual sales and 40 day DSO. 2. Bartley Barstools has a debt-to-capital ratio of 44% based on its $125 million in total capital consisting of $55 million in debt and $70 million in equity from its $14 stock price and 5 million shares outstanding. 3. Doublewide Dealers has a total asset turnover of 5 times and an equity multiplier of 1.5, given its 10% ROA, 2% profit margin, and 15% ROE.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    284 views3 pages

    Fin Man HW1

    Uploaded by

    Kingkong
    1. Baker Brothers has accounts receivable of $800,000 based on its $7.3 million in annual sales and 40 day DSO. 2. Bartley Barstools has a debt-to-capital ratio of 44% based on its $125 million in total capital consisting of $55 million in debt and $70 million in equity from its $14 stock price and 5 million shares outstanding. 3. Doublewide Dealers has a total asset turnover of 5 times and an equity multiplier of 1.5, given its 10% ROA, 2% profit margin, and 15% ROE.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    1. Baker Brothers has a DSO of 40 days.

    The company's annual sales are


    $7,300,000. (Assume there are 365 days in a year.) WHAT IS THE LEVEL OF
    ITS ACCOUNTS RECEIVABLE?
    DSO= AR / (S / 365)
    40= AR/ (7300000 / 365)
    AR= $800,000

    2. Debt to capital ratio Bartley Barstools has a market/book ratio equal to 1. Its
    stock price is $14 share and it has 5 million shares outstanding. The firm’s total
    capital is $125 million and it finances with only debt and common equity. What is
    its debt-to capital ratio?
    Debt to capital ratio = Total debt/Total capital
    Total capital = Total debt+ Total Equity
    => Debt to capital ratio = Total debt/ (Total debt+ Total Equity)
    Total equity = price per share x the number of share
    Total equity = $14 x 5 million= $70 million
    Total debt =$125 million - $70 million = $ 55 million
    Debt to capital ratio = 55/125=0.44 => 44%

    3. Doublewide Dealers has an ROA of 10 percent, a 2 percent profit margin, and a


    return on equity equal to 15 percent. WHAT IS THE COMPANY'S TOTAL
    ASSETS TURNOVER? WHAT IS THE FIRM'S EQUITY MULTIPLIER?
    ROA= 10%, PM= 2%, ROE= 15%
    ROA= NI / TA, PM= NI / S, ROE= NI / E
    ROA= PM * S/TA
    10= 2 * TATO
    TATO= 5
    ROE= PM TATO EM
    15= 2 5 EM
    EM= 1.5

    4. Jaster Jets, on the left side of the balance sheet has $10 billion in total assets.
    The right side of its balance sheet consists of $1 billion in current liabilities, $3
    billion in long-term debt, and $6 billion in common equity. The company has 800
    million shares of common stock outstanding, and its stock price is $32 per share.
    WHAT IS JASTER'S MARKET/BOOK RATIO?
    TA= 1000000000, CL= 100000000, LT debt= 3000000000, CE= 6000000000, shares
    outstanding= 800000000, P= 32
    BV= CE / shares outstanding
    = 6000000000 / 800000000= 7.5
    MB= P / BV
    = 32 / 7.5= 4.2667
    5. A company has an eps of $2.00, a book value per share of $20, and a
    market/book ratio of 1.2x. what is its p/e?
    EPS= 2, BVPS= 20, M/B= 1.2x
    M/B= P / BVPS
    1.2= P / 20
    P= 24
    P/E= 24/2= 12x

    6. A firm has a profit margin of 2% and an equity multiplier of 2.0. It sales are $100
    million and it has total assets of $50 million. What is its ROE?
    PM= 2%, EM= 2, sales= $100 million, TA= $50 million
    ROE= PM TATO EM
    ROE= PM (sales / TA) EM
    = 2 (100 / 50) 2= 8%

    8. Ebersoll Mining has 6 million in sales, its ROE is 12%, and its total assets
    turnover is 3.2x. the company is 50% equity financed. What is its net income?
    TATO= sales / TA
    3.2= 6000000 / TA
    TA= 1875000
    Equity= 1875000 * .5= 937500
    ROE= (NI/S) TATO (TA/E)
    .12= (NI / 6000000) 3.2 (1875000/937500)
    .12= (NI / 6000000) * 6.4
    NI= $112,500

    9. Duval Manufacturing recently reported the following information. NI= 600000,


    ROA= 8%, interest expense= 225000. Tax rate is 35%. What is BEP ratio?
    ROA= NI / TA
    .08= 600000 / TA
    TA= 7500000
    (EBIT - Interest)= NI / (1 - Tax Rate)
    = 600000/ (1 - .35)= 923077
    Tax= (EBIT - Interest) * Tax Rate
    = 923077 * .35= 323077
    NI= EBIT - Interest - Tax
    600000= EBIT - 225000 - 323077
    EBIT= 1148077
    BEP= EBIT / TA
    = 1148077 / 7500000= 15.31%

    10. You are given the following information: Stockholders' equity = $3.75 billion;
    price/earnings ratio = 3.5; common shares outstanding = 50 million; and
    market/book ratio = 1.9. Calculate the price of a share of the company's
    common stock.
    MV= SE * MB
    = 3750000000 * 1.9= 71250000000
    MVPS= MV / shares
    = 71250000000 / 50000000= $142.50

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