Use the financial statements supplied here LOADING... for the International Motor Corporation (IMC) to answer the following questions: a. Calculate the cash conversion cycle for IMC for both 2018 and 2019. What change has occurred, if any? All else being equal, how does this change affect IMC's need for cash? 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.)
Use the financial statements supplied here for the International Motor Corporation (IMC) to answer the following questions: a. Calculate the cash conversion cycle for IMC for both 2018 and 2019. What change has occurred, if any? All else being equal, how does this change affect IMC's need for cash? 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.) a. Calculate the cash conversion cycle for IMC for both 2018 and 2019. What change has occurred, if any? All else being equal, how does this change affect IMC's need for cash? The cash conversion cycle (CCC) for 2018 is days. (Round to one decimal place.) The cash conversion cycle (CCC) for 2019 is days. (Round to one decimal place.) (Choose from the drop-down menus.) What change has occurred in the cash conversion cycle, if any? . All else being equal, how does this change affect IMC's need for cash? b. IMC's suppliers offer terms of net 30. Does it appear that IMC is doing a good job of managing its accounts payable?(Choose the best response below.) O A. The firm is paying when it should be. B. The firm is paying too early; it could be earning interest on its money. C. The firm should be paying within 10 days. D. The firm should be paying after 30 days, if there is no penalty, to take advantage of additional cash on hand. Data table - (Click on the following icon in order to copy the contents of the income statement below into a spreadsheet.) 2019 INTERNATIONAL MOTOR CORPORATION INCOME STATEMENT (in millions) for the years ending December 31 2018 Sales $60,000 (-) Cost of goods sold 52,000 Gross profit $8,000 (-) Selling and general and administrative expenses 6,000 Operating profit $2,000 (-) Interest expense 1,400 Earnings before tax $600 (-) Taxes 300 Earnings after tax $300 $75,000 61,000 $14,000 8,000 $6,000 1,300 $4,700 2,350 $2,350 (Click on the following icon in order to copy the contents of the balance sheet below into a spreadsheet.) 2018 2019 Assets Cash Accounts receivable Inventory Total current assets Net plant, property, and equip. Total assets INTERNATIONAL MOTOR CORPORATION BALANCE SHEET (in millions) as of December 31 2018 2019 Liabilities $3,080 $6,100 Accounts payable 2,793 6,829 Notes payable 5,472 6,753 Accruals $11,345 $19,682 Total current liabilities $23,087 $20,098 Long-term debt $3,697 1,180 5,600 $10,477 $6,500 $4,113 1,250 6,211 $11,574 $7,000 $34,432 $39,780 Total liabilities $16,977 $18,574 Earnings after tax $300 $2,350 (Click on the following icon in order to copy the contents of the balance sheet below into a spreadsheet.) 2018 2019 Assets Cash Accounts receivable Inventory Total current assets Net plant, property, and equip. Total assets INTERNATIONAL MOTOR CORPORATION BALANCE SHEET (in millions) as of December 31 2018 2019 Liabilities $3,080 $6,100 Accounts payable 2,793 6,829 Notes payable 5,472 6,753 Accruals $11,345 $19,682 Total current liabilities $23,087 $20,098 Long-term debt $3,697 1,180 5,600 $10,477 $6,500 $4,113 1,250 6,211 $11,574 $7,000 $34,432 $39,780 $16,977 $18,574 Total liabilities Equity Common stock Retained earnings Total equity Total liabilities and equity $1,903 $15,552 $17,455 $34,432 $3,304 $17,902 $21,206 $39,780 The cash conversion cycle (CCC) for 2019 is days. (Round to one decimal place.) (Choose from the drop-down menus.) What change has occurred in the cash conversion cycle, if any? All else being equal, how does this change affect IMC's need for cash? b. IMC's suppliers offer terms of net 30. Does it appear that IMC is payable? (Choose the best response below.) The cash cycle has not changed A. The firm is paying when it should be. B. The firm is paying too early; it could be earning interest on C. The firm should be paying within 10 days. D. The firm should be paying after 30 days, if there is no peni The cash cycle has increased hand. The cash cycle has decreased (Choose from the drop-down menus.) What change has occurred in the cash conversion cycle, if any? All else being equal, how does this change affect IMC's need for cash? b. IMC's suppliers offer terms of net 30. Does it appear that IMC is doing a good job of managing its accounts payable?(Choose the best response below.) It does not change the need for cash A. The firm is paying when it should be. B. The firm is paying too early; it could be earning interest on its money. C. The firm should be paying within 10 days. D. The firm should be paying after 30 days, if there is no penalty, to take advantage of additional cash on hand. It increases the amount of cash needed It decreases the amount of cash needed
