Case 3. (25 points) Below you can find the financial statements for International Motor Corporation (IMC). a. Calculate the cash conversion cycle for IMC for both 2009 and 2010. What change has occurred, if any? All else being equal, how does this change affect IMC's need for cash? (15 points) b. IMC's suppliers offer terms of Net 30. Based on your previous results, does it appear that IMC is doing a good job of managing its accounts payable? Do you think the company has room for improvement? (10 points) $ INTERNATIONAL MOTOR CORPORATION Income Statement (in millions) for the Years Ending December 31 2009 2010 Sales $ 60,000 $ 75,000 Cost of goods sold 52,000 61,000 Gross profit $ 8,000 $ 14,000 Selling and general and administrative expenses 6,000 8,000 Operating profit $ 2,000 $ 6,000 Interest expense 1,400 1,300 Earnings before tax 600 4,700 Taxes 300 2,350 Earnings after tax $ 300 $ 2,350 INTERNATIONAL MOTOR CORPORATION Balance Sheet (in millions) as of December 31 2009 2010 2009 Assets Liabilities Cash $ 3,080 $ 6,100 Accounts payable $3,600 Accounts receivable 2,800 6,900 Notes payable 1,180 Inventory 6,200 6,600 Accruals 5,600 Total current assets $ 12,080 $ 19,600 Total current liabilities $ 10,380 Net plant property, and equipment $ 23,087 $ 20,098 Long-term debt $ 6,500 Total assets $ 35,167 $ 39,698 Total liabilities $ 16,880 Equity Common stock $ 2,735 Retained earnings $ 15,552 Total equity $ 18,287 Total liabilities and equity $ 35.167 2010 $ 4,600 1,250 6,211 $ 12,061 $ 7,000 $ 19,061 $ 2,735 $ 17,902 $ 20,637 $ 39,698