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? INTERNATIONAL MOTOR CORPORATIONIncome Statement (in $ million)for the Years Ending December 3120152016Sales$ 60,000$ 75,000Cost of goods sold52,00061,000Gross profit$8,000$14,000Selling and general and administrative expenses6,0008,000Operating profitInterest expense$2,000$6,0001,4001,300Earnings before tax2$600$4,700Taxes3002,350Earnings after tax$300$2,350 INTERNATIONAL MOTOR CORPORATIONBalance Sheet (in $ million)as of December 312015201620152016AssetsLiabilitiesAccounts payableNotes payableCash$3,080$6,100$3,600$4,600Accounts receivable2,8006,9001,1801,250Inventory6,2006,600Accruals5,6006,211$ 12,080Net plant, property, and equipment $ 23,087$ 35,167$ 10,380$ 19,600$ 20,098$ 12,061$ 7,000Total current assetsTotal current liabilitiesLong-term debt$6,500Total assets$ 39,698Total liabilities$ 16,880$ 19,061EquityCommon stock$2,735$2,735Retained earnings$15,552$17,902Total equityTotal liabilities and equity$ 18,287$ 35,167$ 20,637$ 39,698

CCC stands for Cash Conversion Cycle which is a metric of working capital that states how many days…

Answered: Use the financial statements supplied…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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?

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
Interest expense
$
2,000
$
6,000
1,400
1,300
Earnings before tax
2$
600
$
4,700
Taxes
300
2,350
Earnings after tax
$
300
$
2,350

INTERNATIONAL MOTOR CORPORATION
Balance Sheet (in $ million)
as of December 31
2015
2016
2015
2016
Assets
Liabilities
Accounts payable
Notes payable
Cash
$
3,080
$
6,100
$
3,600
$
4,600
Accounts receivable
2,800
6,900
1,180
1,250
Inventory
6,200
6,600
Accruals
5,600
6,211
$ 12,080
Net plant, property, and equipment $ 23,087
$ 35,167
$ 10,380
$ 19,600
$ 20,098
$ 12,061
$ 7,000
Total current assets
Total current liabilities
Long-term debt
$
6,500
Total assets
$ 39,698
Total liabilities
$ 16,880
$ 19,061
Equity
Common stock
$
2,735
$
2,735
Retained earnings
$
15,552
$
17,902
Total equity
Total liabilities and equity
$ 18,287
$ 35,167
$ 20,637
$ 39,698

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