2. Two years of financial statement data for the Berlin Export Corporation are shown below.

BERLIN EXPORTS CORPORATION

Balance Sheet 2012 2013

Cash $50,000 $50,000

Accounts Receivables 200,000 300,000

Inventories 450,000 570,000

Total Current Assets 700,000 920,000

Fixed Assets, Net 300,000 380,000

Total Assets $1,000,000 $1,300,000

Accounts Payable 130,000 $180,000

Accruals 50,000 70,000

Bank Loan 90,000 90,000

Total Current Liabilities 270,000 340,000

Long-Term Debt 400,000 550,000

Common Stock ($.05 par) 50,000 50,000

Additional Paid-in-Capital 200,000 200,000

Retained Earnings 80,000 160,000

Total Liab. & Equity $1,000,000 $1,300,000

Income Statement 2012 2013

Net Sales $1,300,000 $1,600,000

Cost of Goods Sold 780,000 960,000

Gross Profit 520,000 640,000

Marketing 130,000 160,000

General & Administrative 150,000 150,000

Depreciation 40,000 55,000

EBIT 200,000 275,000

Interest 45,000 55,000

Earnings Before Taxes 155,000 220,000

Income Taxes (40% rate) 62,000 88,000

Net Income $93,000 $132,000

A. Calculate the inventory-to-sale, sale-to-cash, and purchase-to-payment conversion periods for Berlin Exports for 2013.

Inventory-to-Sale Conversion Period = Average Inventories / (Cost of Goods Sold/365) =

Sale-to-Cash Conversion Period = Average Receivables / (Net Sales/365) =

Purchase-to-Payment Conversion Period = (Average Payables + Average Accrued Liabilities) / (Cost of Goods Sold/365) =

B. Calculate the length of Berlin Exports cash conversion cycle for 2013.

Cash Conversion Cycle = Inventory-to-Sale Conversion Period + Sale-to-Cash Conversion Period Purchase-to-Payment Conversion Period

Cash Conversion Cycle =