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 securities $900 Accounts payable*** $900 Accounts receivable* 1,100 Accrued liabilities Inventories** 700 (salaries and benefits) 400 Other current assets 200 Other current liabilities 600 Total current assets $2,900 Total current liabilities $1,900 Plant and equipment (net) 2,700 Long-term debt and other Other assets 800 liabilities 700 Total assets $6,400 Common stock 1,300 Retained earnings 2,500 Total stockholders’ equity $3,800 Total liabilities and equity $6,400 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 2,800 Other expenses 700 Total expenses $5,000 Earnings before taxes 1,500 Taxes 600 Earnings after taxes (net income) $900 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 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 the time interval of the cash payments for the various resources used by the firm.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 50E: Juroe Company provided the following income statement for last year: Juroes balance sheet as of...

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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 securities	$900	Accounts payable***	$900
Accounts receivable*	1,100	Accrued liabilities
Inventories**	700	(salaries and benefits)	400
Other current assets	200	Other current liabilities	600
Total current assets	$2,900	Total current liabilities	$1,900
Plant and equipment (net)	2,700	Long-term debt and other
Other assets	800	liabilities	700
Total assets	$6,400	Common stock	1,300
		Retained earnings	2,500
		Total stockholders’ equity	$3,800
		Total liabilities and equity	$6,400

*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	2,800
Other expenses	700
Total expenses	$5,000
Earnings before taxes	1,500
Taxes	600
Earnings after taxes (net income)	$900

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
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 the time interval of the cash payments for the various resources used by the firm.

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