Use the financial statements supplied... for the International Motor Corporation (IMC) to answer the following questio
Posted: Sun Jul 03, 2022 6:42 am
Use the financial statements supplied... for the International Motor Corporation (IMC) to answer the following questions:
INTERNATIONAL MOTOR CORPORATION INCOME STATEMENT (in $ millions) for the years ending December 31 2018 2019Sales 60,000 75,000(-) Cost of goods sold 52,000 61,000Gross profit 8,000 14,000(-) Selling and general and administrative expenses 6,000 8,000Operating profit 2,000 6,000(-) Interest expense 1,400 1,300Earnings before tax 600 4,700(-) Taxes 300 2,350Earnings after tax 300 2,350
2018 2019 2018 2019Assets ($) ($) Liabilities ($) ($)Cash 3,080 6,100 Accounts payable 4,015 3,860Accounts receivable 2,989 7,512 Notes payable 1,180 1,250Inventory 6,285 7,326 Accruals 5,600 6,211Total current assets 12,354 20,938 Total current liabilities 10,795 11,321Net plant, property, and equip. 23,087 20,098 Long-term debt 6,500 7,000Total assets 35,441 41,036 Total liabilities 17,295 18,321 Equity Common stock 2,594 4,813 Retained earnings 15,552 17,902 Total equity 18,146 22,715 Total liabilities and equity 35,441 41,036
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.)
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.)
Part 2
The cash conversion cycle (CCC) for 2019 is ____days. (Round to one decimal place.)
Part 3
(Choose from the drop-down menus.)
What change has occurred in the cash conversion cycle, if any?
a. cash cycle has not changed
b. cash cycle has increased
c. cash cycle has decreased
. All else being equal, how does this change affect IMC's need for cash?
a. It does not change the need for cash
b. It increases the amount of cash needed
c. It decreases the amount of cash needed
.
Part 4
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.)
A.
The firm should be paying after 30 days, if there is no penalty, to take advantage of additional cash on hand.
B.
The firm is paying when it should be.
C.
The firm is paying too early; it could be earning interest on its money.
D.
The firm should be paying within 10 days.
INTERNATIONAL MOTOR CORPORATION INCOME STATEMENT (in $ millions) for the years ending December 31 2018 2019Sales 60,000 75,000(-) Cost of goods sold 52,000 61,000Gross profit 8,000 14,000(-) Selling and general and administrative expenses 6,000 8,000Operating profit 2,000 6,000(-) Interest expense 1,400 1,300Earnings before tax 600 4,700(-) Taxes 300 2,350Earnings after tax 300 2,350
2018 2019 2018 2019Assets ($) ($) Liabilities ($) ($)Cash 3,080 6,100 Accounts payable 4,015 3,860Accounts receivable 2,989 7,512 Notes payable 1,180 1,250Inventory 6,285 7,326 Accruals 5,600 6,211Total current assets 12,354 20,938 Total current liabilities 10,795 11,321Net plant, property, and equip. 23,087 20,098 Long-term debt 6,500 7,000Total assets 35,441 41,036 Total liabilities 17,295 18,321 Equity Common stock 2,594 4,813 Retained earnings 15,552 17,902 Total equity 18,146 22,715 Total liabilities and equity 35,441 41,036
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.)
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.)
Part 2
The cash conversion cycle (CCC) for 2019 is ____days. (Round to one decimal place.)
Part 3
(Choose from the drop-down menus.)
What change has occurred in the cash conversion cycle, if any?
a. cash cycle has not changed
b. cash cycle has increased
c. cash cycle has decreased
. All else being equal, how does this change affect IMC's need for cash?
a. It does not change the need for cash
b. It increases the amount of cash needed
c. It decreases the amount of cash needed
.
Part 4
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.)
A.
The firm should be paying after 30 days, if there is no penalty, to take advantage of additional cash on hand.
B.
The firm is paying when it should be.
C.
The firm is paying too early; it could be earning interest on its money.
D.
The firm should be paying within 10 days.