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.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
   

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

 
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