Assume that all of MNQ Company's sales are credit sales.

• Calculate and critique MNQ Company's cash conversion and operating cycles from 2004 to 2008.

MNQ Company

Income statement ($000 - Except for per share information)

2008

2007

2006

2005

2004

Sales

$1,200

$1,100

$880

$750

$875

Cost of goods sold

$540

$550

$264

$360

$306

Selling, general, and administrative expenses

$180

$200

$165

$210

$180

Depreciation

$200

$20

$100

$5

$75

Operating income

$280

$330

$351

$175

$314

Other income

$40

$30

$20

$18

$30

Earnings before interest and taxes (EBIT)

$320

$360

$371

$193

$344

Interest expense

$28

$27

$26

$25

$24

Earnings before taxes (EBT)

$292

$333

$345

$169

$320

Taxes (35%)

$102

$117

$121

$59

$112

Net income

$190

$217

$224

$110

$208

Addition to retained earnings

$45

$55

$200

$85

$120

Dividends

$145

$162

$24

$25

$88

Additional Information:

Shares outstanding

50

50

50

50

50

Book value per share

27

25.5

24.2

19.6

17.7

Market price per share

21

18.5

18

16

25

Earnings per share

$3.80

$4.33

$4.49

$2.19

$4.15

Dividends per share

$2.90

$3.23

$0.49

$0.49

$1.75

MNQ Company
Balance Sheet ($000)						2008	2007	2006	2005	2004
Assets
Current Assets
	Cash and cash equivalents					$250	$225	$191	$160	$192
	Accounts receivable					$650	$585	$497	$425	$510
	Inventories					$300	$270	$230	$200	$240
		Total Current Assets				$1,200	$1,080	$918	$785	$942
Fixed Assets
	Property, plant, and equipment					$2,200	$1,870	$1,814	$1,422	$1,400
	Less: Accumulated depreciation					$400	$200	$180	$80	$75
	Net property, plant, and equipment					$1,800	$1,670	$1,634	$1,342	$1,325
	Intangible assets					$300	$240	$220	$210	$205
		Total Fixed Assets				$2,100	$1,910	$1,854	$1,552	$1,530
Total Assets						$3,300	$2,990	$2,772	$2,337	$2,472
Liabilities and Stockholders' Equity
Current Liabilities
	Accounts payable					$400	$340	$299	$245	$319
	Notes payable					$300	$255	$224	$184	$239
	Accrued expenses					$600	$510	$449	$368	$478
		Total Current Liabilities				$1,300	$1,105	$972	$797	$1,037
Long-Term Liabilities
	Long-term debt					$400	$380	$370	$350	$345
	Deferred taxes					$250	$230	$220	$210	$205
		Total Long-Term Liabilities				$650	$610	$590	$560	$550
		Total Liabilities				$1,950	$1,715	$1,562	$1,357	$1,587
Stockholders' Equity
	Common stock					$100	$100	$100	$100	$100
	Capital surplus					$450	$420	$410	$380	$370
	Retained earnings					$800	$755	$700	$500	$415
		Total Stockholders' Equity				$1,350	$1,275	$1,210	$980	$885
		Total Liabilities and Stockholders' Equity				$3,300	$2,990	$2,772	$2,337	$2,472