Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Textbook Question
Chapter 26, Problem 15P
Use the financial statements supplied on the next page for International Motor Corporation (IMC) to answer the following questions.
- a. Calculate the cash conversion cycle for IMC for both 2015 and 2016. 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?
| International Motor Corporation | ||
| Income Statement (in $ million) for the Years Ending December 31 | ||
| 2015 | 2016 | |
| 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 |
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Use the financial statements supplied below for International Motor Corporation(IMC) to answer the following questions.
Calculate the cash conversion cycle for IMC for both 2015 and 2016. What change has occurred, if any? All else being equal, how does this change affect IMC’s need for cash?
IMC’s suppliers offer terms of Net 30. Does it appear that IMC is doing a good job of managing its accounts payable?
Here is the complete worksheet I am working on for my homework. The blank spots I had to fill in are:
Income statement: sales and costs of goods sold for 2018
Balance sheet was cash and net fixed assets for 2018
Cash flow statements were: depreciation, accounts receivable and accts payable
Can you let me know if the information I have provided looks correct? I just want to make sure I am on the right track. Thank you!
Income Statement
For the year:
2016
2017
2018
Sales
$ 120,000
$ 150,000
$ 180,000
Cost of Goods Sold
$ 100,000
$ 120,000
Gross Profit
$ 60,000
General, Selling, & Administrative Expense
$ 50,000
Depreciation
$ 8,500
Net Income
$ 1,500
Balance Sheet
For the year ending:
2017
2018
Assets
Cash
$…
1. How much cash is received from sales to customers for year 2021? Assume all the sales were made on credit basis
. 2. What is the net increase or decrease in the Cash account for year 2021?
Chapter 26 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 26.1 - What is the firms cash cycle? How does it differ...Ch. 26.1 - How does working capital impact a firms value?Ch. 26.2 - Prob. 1CCCh. 26.2 - Prob. 2CCCh. 26.3 - Prob. 1CCCh. 26.3 - Prob. 2CCCh. 26.4 - What is accounts payable days outstanding?Ch. 26.4 - What are the costs of stretching accounts payable?Ch. 26.5 - What are the benefits and costs of holding...Ch. 26.5 - Prob. 2CC
Ch. 26.6 - Prob. 1CCCh. 26.6 - Prob. 2CCCh. 26 - Prob. 1PCh. 26 - Prob. 2PCh. 26 - Aberdeen Outboard Motors is contemplating building...Ch. 26 - Prob. 4PCh. 26 - Prob. 5PCh. 26 - Prob. 6PCh. 26 - The Fast Reader Company supplies bulletin board...Ch. 26 - Prob. 8PCh. 26 - Prob. 9PCh. 26 - Prob. 10PCh. 26 - The Mighty Power Tool Company has the following...Ch. 26 - What is meant by stretching the accounts payable?Ch. 26 - Prob. 13PCh. 26 - Your firm purchases goods from its supplier on...Ch. 26 - Use the financial statements supplied on the next...Ch. 26 - Prob. 16PCh. 26 - Which of the following short-term securities would...
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