FINANCIAL MANAGEMENT

WEEKLY ASSIGNMENT 3

Disusun oleh :

PindiYulinar Rosita ( 008201905023 )

Romi Prabowo ( 008201905002 )
Saurma Damayanti ( 008201905021 )
Sekar Putri Ayuni ( 008201905026 )
Siska Novitasari ( 008201905006 )
Weekly Assigement 3

1. 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.

 Jawaban :

DSO = 20 Days
Average Sales/day = $20.000
Receivable =?

DSO =Receivable /  Average sales/day

20 = Receivable / $20.000
Receivable = 20 * 20.000 = $400.000

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?

 Jawaban :

Debt Ratio = ?
Debt to Equty = 2.5
Debt ratio = Debt to Equty / ( 1 + Debt to Equity )
= 2.5 / (1 + 2.5)
= 2.5 / 3.5 = 0,71 —> 71%

3. 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?

 Jawaban :

Winston’s market cap= 75 * 800 Million = $60 million

Book Value = Asset - Liabilities
= $10 Billion - $4 Billion
= $6 Billion —> Commont Equity
Market/book ratio = $60 Billion / $6Billion
= 10 —> Market Price to book ratio

4. 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?
Jawaban :

Share Price = Price/cash flow ratio * Cash flow per share

Share Price = 8.0 * $ 3.00 = $ 24.00
P/E ratio = Share price / EPS
P/E ratio = $24.00 / $1.50
P/E ratio = 16.0

5. 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?
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?

Jawaban :

ROE = ROA * Equity multiplier

15% / 10% = Equity multiplier
15% / 10% = 1.5 —> Equity multiplier
ROA / (Profit Margin) —> ( Total asset turnover )
10% / 2% = 5% —> Total asset turnover

6. 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?

Jawaban :

Current Asset (CA)

Current Liabilities (CL)
CA;CL = 1.5
CA-Inventory;CL = 1.0

Current Liabilities = ? ; Inventory = ?

CA;CL = 1.5
CL = $3Million / 1.5
CL = $2Million

CA-Inventory;CL = 1.0
$3Million-Inventory = 1.0
=$2Million

CA-Inventory = CL
$3Million-Inventory = $2Million
So, Inventory —> $1Million
 7. Assume you are given the following relationships for the Clayton Corporation:

Sales/total assets 1.5

Return on assets (ROA) 3%

Return on equity (ROE) 5%

Calculate Clayton’s profit margin and debt ratio.

 Jawaban :

Return on assets = Profit margin * Assets turnover

3%—> 0.3 = Profit Margin * 1.5
0.3 / 1.5 = 0.2 —>2% 
So, Profit Margin is 2%

ROA / ROE
= 0.3 / 0.5 = 0.6 —> 60% Total assets from equity
Therefore debt = Assets - Equity
= 1 - 0.6 = 0.4 —> 40% 
So, Therefore debt ratio is 40%

8. The Nelson Company has $1,312,500 in current assets and $525,000 in current
liabilities. Its initial inventory level is $375,000, and it will raise funds as additional
notes payable and use them to increase inventory. How much can Nelson’s short-term
debt (notes payable) increase without pushing its current ratio below 2.0? What will
be the firm’s quick ratio after Nelson has raised the maximum amount of short-term
funds?

Jawaban :

Present current ratio = $1,312,500 / $525,000

= 2.5

Minimum current ratio= $1,312,500 + ∆NP / $525,000 + ∆NP$1,312,500 + ∆NP

= 2.0

$1,312,500 + 2∆NP = $1,050,000 + 2∆NP

∆NP = $262,500.

Short-term debt can increase by a maximum of $262,500 without

violating a 2 to 1current ratio, assuming that the entire increase in notes payable is
used to increase currentassets.
 Since we assumed that the additional funds would be used to increase
inventory,the inventory account will increase to $637,500, and current assets will
total $1,575,000.

Quick ratio = ($1,575,000 - $637,500) / $787,500

= $937,500 / $787,500

= 1.19 Times