CASE 3 (25 points)

Income statements and balance sheets for Melia Corporation follow.

Income Statements for Years 2015 and 2016

2015 2016

Net sales	$438,000	$575,000
- Cost of goods sold	-285,000	-380,000
Gross profit	153,000	195,000
-Administrative expenses	-45,000	-65,000
-Marketing expenses	-32,000	-39,000
-Research and development	-20,000	-27,000
-Depreciation	-14,000	-17,000
EBIT	42,000	47,000
-Interest expense	-12,000	-20,000
income before taxes	30,000	27,000
-Income before taxes	-9,000	-8,000
Net income	$21,000	$19,000

Balance Sheets for Years Ended 2014, 2015, and 2016

Assets 2014 2015 2016

Cash and marketable securities	$10,000	$10,000	$5,000
Receivable	60,000	75,000	105,000
Inventories	70,000	95,000	140,000
Total current assets	140,000	180,000	250,000
Gross plant and equipment	205,000	205,000	255,000
Less: accumulated depreciation	-28,000	-42,000	-59,000
Net plant and equipment	177,000	163,000	196,000
Total assets	$317,000	$343,000	$446,000
Liabilities and Equity
Payable	47,000	57,000	84,000
Short -term bank loan	40,000	44,000	110,000
Accrued liabilities	95,000	110,000	204,000
Long-term debt	100,000	90,000	80,000
Owners equity	122,000	143,000	162,000
Total liabilities and equity	$317,000	$343,000	$446,000

Instructions:

1. Using the above information, calculate for 2015 and 2016 the following: a. Receivables turnover, Inventory turnover, and Payables turnover. b. Receivables period, Inventory period, and Payables period. c. Operating Cycle and Cash Conversion Cycle.

(5 points) (5 points) (5 points)

2. Discuss the changes that took place from 2015 to 2016 and suggest the ways how the company could improve its performance. (10 points)