Question
Consider the financial statements for Ace Inc. Ace Inc. Income Statements ($000s) Year 1 Year 2 Sales $249,770 $290,900 Cost of goods sold 165,040 172,750
Consider the financial statements for Ace Inc.
Ace Inc. Income Statements ($000s) |
| ||
Year 1 | Year 2 | ||
Sales | $249,770 | $290,900 | |
Cost of goods sold | 165,040 | 172,750 | |
Gross margin | 84,730 | 118,150 | |
Selling & admin expenses | 67,710 | 75,680 | |
Depreciation | 13,200 | 14,660 | |
Operating income | 3,820 | 27,810 | |
Interest expense | 890 | 820 | |
Profit before tax | 2,930 | 26,990 | |
Income tax (at 3535%) | 1,026 | 9,447 | |
Net income | $1,904 | $17,543 | |
Common dividend paid | $1,080 | $1,080 |
Ace Inc. Balance Sheets at December 31 ($000s) |
| ||
Year 1 | Year 2 | ||
Cash | $2,340 | $2,883 | |
Accounts receivable | 29,020 | 31,440 | |
Inventories | 17,910 | 20,490 | |
Total current assets | 49,270 | 54,813 | |
Net property & equipment | 19,200 | 24,230 | |
Total assets | $68,470 | $79,043 | |
Notes payable: bank | $19,450 | $13,390 | |
Accounts payable | 14,920 | 15,900 | |
Total current liabilities | 34,370 | 29,290 | |
Long-term debt | 21,060 | 20,250 | |
Common equity | 13,040 | 29,503 | |
Total liabilities and equity | $68,470 | 79,043 |
. Given the following data:
Year 1 | Year 2 | |
Inventory days | 39.6139.61 | 43.2943.29 |
Receivable days | 42.4142.41 | 39.4539.45 |
Payable days | 33.0033.00 | 33.5933.59 |
Suppose year 2's days of inventory were reduced to
35.9935.99.
How much cash would be freed up?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started