70.2K

Verified Solution

Link Copied!

The Hopewell Pharmaceutical Companys balance sheet and income statement for last year are as follows:

Balance Sheet (in Millions of Dollars)
Assets			Liabilities and Equity
Cash and marketable securities	$800		Accounts payable***	$900
Accounts receivable*	1,000		Accrued liabilities
Inventories**	900		(salaries and benefits)	200
Other current assets	200		Other current liabilities	900
Total current assets	$2,900		Total current liabilities	$2,000
Plant and equipment (net)	2,500		Long-term debt and other
Other assets	500		liabilities	300
Total assets	$5,900		Common stock	1,400
			Retained earnings	2,200
			Total stockholders equity	$3,600
			Total liabilities and equity	$5,900
*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	$6,200
Cost of sales	1,500
Selling, general, and administrative expenses	2,600
Other expenses	600
Total expenses	$4,700
Earnings before taxes	1,500
Taxes	600
Earnings after taxes (net income)	$900

1. Determine Hopewell's cash conversion cycle. Assume that there are 365 days per year. Do not round intermediate calculations. Round your answer to one decimal place.

   days

2. Give an interpretation of the value computed in part a.

   The number of the cash conversion cycle denotes to what extent the time interval of the collection of cash receipts from product sales -Select-exceedsis less thanItem 2 the time interval of the cash payments for the various resources used by the firm.

Answer & Explanation Solved by verified expert

See Answer