Book Cooker Co. generated $100 million in base Year 1 and is expected to grow 15% in
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Question:
Book Cooker Co. generated $100 million in base Year 1 and is expected to grow 15% in Year 2. The company has a gross margin of 50% and a net margin of 15% in both Year 1 and Year 2. Days sales in inventory were 90 days in both Year 1 and Year 2. Assume that the year-over-year change in inventory is the only adjustment between earnings and cash from operating activities. What were total accruals and what proportion of earnings were represented by total accruals in Year 2?
A. $14 million and 3%
B. $3 million and 2%
C. $2 million and 3%
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