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Use the financial statements shown below for the International Motor Corporation (IMC) to answer the following questions: a. Calculate the cash conversion cycle for IMC

Use the financial statements shown below for the International Motor Corporation (IMC) to answer the following questions: a. Calculate the cash conversion cycle for IMC for both 2020 and 2021. What change has occurred, if any? All else being equal, how does this change affect IMC's need for cash? Answer: The cash conversion cycle (CCC) for 2020 is ______ days. (Round to one decimal place.) Answer: The cash conversion cycle (CCC) for 2021 is _________ days. (Round to one decimal place.) Answer: The cash cycle has _______. (Answer "increased", "decreased", or "not changed") Answer: All else being equal, this change (or lack of change) (answer "increases", "decreases", or "does not change") the amount of cash needed. b. IMC's suppliers offer terms of net 30. Does it appear that IMC is doing a good job of managing its accounts payable? (Hint: use a 365-day year.) Choose from the following. _______(Answer "A", "B", "C", or "D".) A. The firm is paying too early; it could be earning interest on its money. B. The firm should be paying after 30 days, if there is no penalty, to take advantage of additional cash on hand. C. The firm should be paying within 10 days. D. The firm is paying when it should be.

INTERNATIONAL MOTOR CORPORATION
INCOME STATEMENT (in millions) for the years ending December 31
2020 2021
Sales $60,000 $75,000
(-) Cost of goods sold 52,000 61,000
Gross profit $8,000 $14,000
(-) Selling and general and administrative expenses 6,000 8,000
Operating profit $2,000 $6,000
(-) Interest expense 1,400 1,300
Earnings before tax $600 $4,700
(-) Taxes 300 2,350
Earnings after tax $300 $2,350
INTERNATIONAL MOTOR CORPORATION
BALANCE SHEET (in millions) as of December 31
2020 2021 2020 2021
Assets Liabilities
Cash $3,080 $6,100 Accounts payable $3,600 $4,600
Accounts receivable 2,800 6,900 Notes payable 1,180 1,250
Inventory 6,200 6,600 Accruals 5,600 6,211
Total current assets $12,080 $19,600 Total current liabilities $10,380 $12,061
Net plant, property, and equip. $23,087 $20,098 Long-term debt $6,500 $7,000
Total assets $35,167 $39,698 Total liabilities $16,880 $19,061
Equity
Common stock $2,735 $2,735
Retained earnings $15,552 $17,902
Total equity $18,287 $20,637
Total liabilities and equity $35,167 $39,698

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