XYZ Co. is a saffron importer that resells its products to U.S. retailers. In 2022, XYZ Co. imported $23 million worth of saffron from around
XYZ Co. is a saffron importer that resells its products to U.S. retailers. In 2022, XYZ Co. imported $23 million worth of saffron from around the world, all of which was paid for prior to shipping. Upon receipt of the saffron, the importer immediately resold it to U.S. retailers for $26 million. To allow its retail clients time to resell the saffron, XYZ Co. sells to retailers on credit. Prior to the end of the 2022 business year, XYZ Co. collected 80% of its outstanding accounts receivable. There are no taxes. (a) What is the accounting profit that XYZ Co. generated for the year? (b) Did XYZ Co. have a successful year from an accounting perspective? (c) What is the financial cash flow that XYZ Co. generated for the year? (d) Did XYZ Co. have a successful year from a financial perspective? (e) If the current pattern persists, what is your expectation for the future success of XYZ Co.? Explain.
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