Week 2 Fin515 Homework

1102 WordsJul 30, 20135 Pages
3-1 Days Sales Outstanding 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. Formula for DSO = Receivables/ Ave sales per day = Receivables/( Annual sales/365) = 20 days x $20,000= $400,000 Solution: AR = $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 ratio? Formula for Debt ratio = Debt Ratio + Equity Ratio = 1 Equity Multiplier = 2.5 Therefore Equity Ratio = 1/EM Equity Ratio = 1/2.4 = 0.40 MEMORIZE this formula: Debt Ratio + Equity Ratio = 1 There for Debt Ratio = 1…show more content…
&/Ehrhardt M. (2010). Financial Management: Theory & Practice, 13th Edition. South Western Educational Publishing. Mason

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