submission Packaging Inc. (Page 701) Packaging Inc (PI) is the leading producer of container-board and corrugated products in Egypt. PI's corrugated products manufacturing plants produce a range of corrugated packaging products, including shipping containers used to protect and transport manufactured goods, multi-color boxes and displays with strong visual appeal that help to merchandise the packaged product in retail locations. In addition, Pl is a producer of meat boxes and wax-coated boxes for the agricultural industry. Pl's products are produced in two corrugated plants, both located in the outskirts of Cairo, and one sheet plant near Alexandria, and sold throughout the country. The company also owns a medium size containerboard mill. Three years ago, the company embarked on a long term sales strategy, targeting Africa's northern region. While barriers to entry are fairly low, progress has been slow. With less than 12 percent of last years total sales generated outside Egypt, PI fell well short of the 20 percent its management had originally envisioned. PI's CFO, Abubakar El Sayed, is also concerned about the company's 19.2 percent profit margin it generated from 2013 sales of EGP 151 million ($25 million), as it puts PI's profitability slightly below the industry average of 21.1 percent. The income statement for 2013 is shown below: Income Statement: 2013 (in EGP 000) Sales Cogs 48% SG&A 15% Depreciation EBIT Interest paid @8% Taxable income Taxes @30% Net Income Dividends Addition to Retained earnings 150,870 72,418 22,631 12.355 43,467 2.012 41,455 12436 29,018 23,215 5,804 Focusing on improving the company's asset management, Mr. El Sayed implemented a plan last year that rests on three distinct components: first, the phasing in of a just-in- time inventory system to lower the amount and length of cash tied up in inventory Second, the revamping of the company's cash collection system and, third, the deliberate decrease of the company's accounts payables turnover. The CFO has asked you to analyze the latest financial statements for any signs of progress his plan has had on 2014 asset management efficiency levels. lance Sheet: 2013 (in EGP 000) Cash Accounts receivable 23,994Notes payable Inventory 12,776 Accounts payable 14,104 17.650 Current liabilities31,754 25.150 Total debt56,904 17.690 Current assets54,460 Long-term debt Net fixed assets 34,950 Equity Retained earnings 23,232 9,274 Total debt and equity89,410 Total assets89,410 lance Sheet: 2014 (in EGP 000) Cash Accounts receivable 33,620Notes payable Inventory 5,712 Accounts payable 17,890 18.350 Current liabilities36,240 21.981 Total debt58,221 16.950 Current assets56,282Long-term debt Net fixed assets 38,565 Equity Retained earnings 20,542 16,084 Total debt and equity94,847 Total assets94,847 While the accounting department already provided you with the latest balance sheet (and that of the previous year, for comparison), you approximate the income statement based on a 10 percent increase in sales. You calculate both cost positions (Cogs and SG&A) using last year's respective cost-to-sales ratio and assume an unchanged EGP amount of depreciation. Required a. Generate an approximation of the company's 2014 income statement. b. Calculate inventory turnover, inventory period, receivable turnover, receivable period, operating cycle, payable turnover, payable period, and the length of the cash cycle for 2013 and 2014