Part 2

Question 4: (2 point)

Jaster Jets 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, and its stock price is $32 per share.

What is Jasters market/book ratio? Explain the importance of this ratio.

Question 5: (2 point)

A company has an EPS of $2, a cash flow per share of $3, and a price/cash flow of 8.

What is its P/E ratio? Explain this ratio.

Question 6: (2 points)

A firm has a profit margin of 2% and an equity multiplier of 2. Its sales are $100 million, and it has total assets of $50 million.

What is its ROE? Differentiate between ROE and ROA.