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. 3-4. 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 the P/E ratio? 3-7. 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? 3-9. The Nelson Company has $1,312,500 in current assets and $525,000 in current liabilities. It?s 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? 3-13. Data for Morton Chip Company and its industry averages follow. a. Calculate the indicated ratios for Morton. b. Construct the extended DU Pont equation for both Morton and the industry. c. Outline Morton?s strengths and weaknesses as revealed by your analysis. d. Suppose Morton had doubled its sales as well as its inventories, accounts receivables, and common equity during 2010. How would that information affect the validity of your ratio analysis? (Hint: Think about averages and the effects of rapid growth on ratios if averages are not used. No calculations are needed.
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