FINA 3770 Chapter 4 HW

Pratik Jog

Problem 2
Market Book Ratio 1
Stock Price/Share $14
Outstanding Shares $ 5,000,000.00
Equity $ 70,000,000.00 Outstanding Shares * Stock Price
Total Capital $125,000,000
Debt $55,000,000 Total Capital - Equity
Debt-to-Capital Ratio 44%
Debt-to-Capital Ratio = (Debt/Total Capital)

Problem 3
ROA 10% Net Income/ Assets
Profit Margin 2% Net Income/ Sales
ROE 15% Net Income/ Equity
Total Assets Turnover 5

Equity Multiplier 1.5

ROA = PM *S/TA
110 = 2 * TATOr = 5
15= 2*5 EM = EM =1.5

Problem 6
Profit Margin 2%
Equity Multiplier 2
Sales $100,000,000
Total Assets $50,000,000
ROE 8%
ROE = Profit Martgin * TATO * EM
ROE = PM(Sales/TA)EM
NA 3770 Chapter 4 HW
Pratik Jog

Problem 24
A
Current Ratio 3.56x
Debt to Total Capital 20.05%
DSO 30.3
ROA 6%
ROIC 7.54%
B
Firm ROE 8.60% 3.4 * 1.77 * 450/315
Industry ROE 12.86% 3% * 3 * 12.86/9
C
Yes, the ratios are effected by the amount of sales
D
Day Sales Outstanding and ROIC
E
It could cause certain ratios to either increase or decrease, in
order to correct it one would have to edit certain parts of the
balance sheet to work with the new sales pattern