Financial Management

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MGT 315V Marty Finucane
Fall 2012 Assignment # 2

4-4)
Stockholders’ Equity$750,500
EPS $3
P/E Ratio 12.25
Outstanding Shares 50,000
P/B Ratio ?
P/B Ratio = Market Price per Share/Equity Book Value per Share 12.25 = x/3; 12.24 x 3 = 36.75 = price per share
Equity Book Value per share = Equity/Outstanding Shares = 750,500/50,000 = 15.01 P/B Ratio = Price per share/equity book value per share = 36.75/15.01 = 2.45 A P/B Ratio of 2.45 indicates that investors see Greene, Inc. as a company worth more than its current value on the market. 4-6)

Calculate:
Current Ratio = current assets/current liabilities = 3,500,000/2,000,000 = 1.75 Times Interest Earned = operating income/interest expense = 1,700,000/367,000 = 4.63 Inventory Turnover = COGS/inventory = 3,300,000/1,000,000 = 3.3 Total Asset Turnover = Sales/Total Assets = 8,000,000/8,000,000 = 1.0 Operating Profit Margin = Operating Profit/Sales = 1,700,000/8,000,000 = 21.25% Operating Return on Assets = Operating Profit/Total Assets = 1,700,000/8,000,000 = 21.25% Debt Ratio = Total Debt/Total Assets = 4,000,000/8,000,000 = 50% Average Collection Period = Accounts Receivable/Daily Credit Sales = 2,000,000/(8,000,000/365) = 91.24 Fixed Asset Turnover = Sales/Fixed Assets = 8,000,000/4,500,000 = 1.78 Return on Equity = Net Income/Common Equity = 800,000/4,000,000 = 20% 5-7)

$10,000 @ 6% annually
a. Year 1 =10,000 x (1+.06) = 10,600
Year 2 = 10,600 x (1.06) = 11,236
Year 3 =11,236 x (1.06) = 11,910.16
Year 4 =11,910.16 x (1.06) = 12,624.77
Year 5 =12,624.77 x (1.06) = 13,382.26
Year 6 = 13.382.26 x (1.06) = 14,185.19
Year 7 = 14,185.19 x (1.06) = 15,036.30
Year 8 = 15,036.30 x (1.06) = 15,938.48
Year 9 = 15,938.48 x (1.06) = 16,894.79
Year 10 = 16,894.79 x (1.06) = 17,908.48
Year 11 = 17,908.48 x (1.06) = 18.982.99
Year 12 = 18,982.99 x (1.06) = 20,121.97
Year 13 = 20,121.97 x (1.06) = 21,329.29...
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