Book Cookers Co. generated $100 million in base Year 1 and is expected to grow 25% in Year 2. The company has a net margin of 15% in both Year 1 and Year 2. Days sales outstanding is 90 days in both Year 1 and Year 2. Assume that the year-over-year change in accounts receivable 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?

answer :

$4 million and 16%

$6 million and 49%

$6 million and 51%

$6 million and 33%

Book Cookers Co. generated $250 million in base Year 1 and is expected to grow 12% in Year 2. The company has a Net Margin of 15% in both Year 1 and Year 2. Days Sales Outstanding is 135 days in both Year 1 and Year 2. Assume that the year-over-year change in accounts receivable is the only adjustment between earnings and cash flow from operating activities. What were total accruals and what proportion of earnings were represented by total accruals in Year 2?

$4 million and 9%

$11 million and 26%

$11 million and 9%