Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The Hopewell Pharmaceutical Companys balance sheet and income statement for last year are as follows: Balance Sheet (in Millions of Dollars) Assets Liabilities and Equity
The Hopewell Pharmaceutical Companys balance sheet and income statement for last year are as follows:
Balance Sheet (in Millions of Dollars) | ||||
Assets | Liabilities and Equity | |||
Cash and marketable securities | $800 | Accounts payable*** | $900 | |
Accounts receivable* | 1,000 | Accrued liabilities | ||
Inventories** | 900 | (salaries and benefits) | 200 | |
Other current assets | 200 | Other current liabilities | 900 | |
Total current assets | $2,900 | Total current liabilities | $2,000 | |
Plant and equipment (net) | 2,500 | Long-term debt and other | ||
Other assets | 500 | liabilities | 300 | |
Total assets | $5,900 | Common stock | 1,400 | |
Retained earnings | 2,200 | |||
Total stockholders equity | $3,600 | |||
Total liabilities and equity | $5,900 | |||
*Assume that average accounts receivable are the same as ending accounts receivable. | ||||
**Assume that average inventory over the year was the same as ending inventory. | ||||
***Assume that average accounts payable are the same as ending accounts payable. |
Income Statement (in Millions of Dollars) | |
Net sales | $6,200 |
Cost of sales | 1,500 |
Selling, general, and administrative expenses | 2,600 |
Other expenses | 600 |
Total expenses | $4,700 |
Earnings before taxes | 1,500 |
Taxes | 600 |
Earnings after taxes (net income) | $900 |
- Determine Hopewell's cash conversion cycle. Assume that there are 365 days per year. Do not round intermediate calculations. Round your answer to one decimal place.
days
- Give an interpretation of the value computed in part a.
The number of the cash conversion cycle denotes to what extent the time interval of the collection of cash receipts from product sales -Select-exceedsis less thanItem 2 the time interval of the cash payments for the various resources used by the firm.
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