10. The Hopewell Pharmaceutical Company's balance sheet and income statement for last year are as follows: Balance Sheet (in Millions of Dollars) Assets Liabilities and Equity Cash and marketable $1,100 Accounts payable*** $900 securities Accounts receivable* 1,300 Accrued liabilities Inventories** 800 (salaries and benefits) 300 Other current assets 200 Other current liabilities 700 Total current assets $3,400 Total current liabilities $1,900 Plant and equipment (net) 2,300 Long-term debt and other Other assets 1,000 liabilities 1,000 Total assets $6,700 Common stock 1,800 Retained earnings 2,000

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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10. The Hopewell Pharmaceutical Company's balance sheet and income statement for
last year are as follows:
CHALLENGE
Balance Sheet (in Millions of Dollars)
Assets
Liabilities and Equity
Cash and marketable
$1,100
Accounts payable***
$900
securities
Accounts receivable*
1,300
Accrued liabilities
Inventories**
800
(salaries and benefits)
300
Other current assets
200
Other current liabilities
700
Total current assets
$3,400
Total current liabilities
$1,900
Plant and equipment (net)
2,300
Long-term debt and other
Other assets
1,000
liabilities
1,000
Total assets
$6,700
Common stock
1,800
Retained eamings
2,000
Total stockholders" equity
$3,800
Total liabilities and equity
$6,700
*Assume that average accounts receivable are the same as ending accounts receivable.
**Assume that average inventory over the year was the same as ending inventory.
***Assume that average accounts payable are the same as ending accounts payable.
Income Statement (in Millions of Dollars)
Net sales
$6,500
Cost of sales
1,500
Selling, general, and administrative expenses
2,500
Other expenses
800
Total expenses
$4,800
Eamings before taxes
1,700
Тахes
680
Earmings after taxes (net income)
$1,020
a. Determine Hopewell's cash conversion cycle.
b. Give an interpretation of the value computed in Part a.
Transcribed Image Text:10. The Hopewell Pharmaceutical Company's balance sheet and income statement for last year are as follows: CHALLENGE Balance Sheet (in Millions of Dollars) Assets Liabilities and Equity Cash and marketable $1,100 Accounts payable*** $900 securities Accounts receivable* 1,300 Accrued liabilities Inventories** 800 (salaries and benefits) 300 Other current assets 200 Other current liabilities 700 Total current assets $3,400 Total current liabilities $1,900 Plant and equipment (net) 2,300 Long-term debt and other Other assets 1,000 liabilities 1,000 Total assets $6,700 Common stock 1,800 Retained eamings 2,000 Total stockholders" equity $3,800 Total liabilities and equity $6,700 *Assume that average accounts receivable are the same as ending accounts receivable. **Assume that average inventory over the year was the same as ending inventory. ***Assume that average accounts payable are the same as ending accounts payable. Income Statement (in Millions of Dollars) Net sales $6,500 Cost of sales 1,500 Selling, general, and administrative expenses 2,500 Other expenses 800 Total expenses $4,800 Eamings before taxes 1,700 Тахes 680 Earmings after taxes (net income) $1,020 a. Determine Hopewell's cash conversion cycle. b. Give an interpretation of the value computed in Part a.
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