Canadian Bacon Inc. financial statements are presented in the table below. Based
ID: 2727793 • Letter: C
Question
Canadian Bacon Inc. financial statements are presented in the table below.
Based on the information in the table, and using a 365-day year, calculate cash conversion cycle
Round the answers to two decimal places
Balance Sheet December 31, 2012
Cash and marketable securities
$198,000
Accounts payable
$288,000
Accounts receivable
$469,000
Notes payable
$65,000
Inventories
$577,000
Accrued expenses
$84,000
Prepaid expenses
$15,700
Total current liabilities
$437,000
Total current assets
$1,259,700
Long-term debt
$237,000
Gross fixed assets
$1,954,000
Par value and paid-in-capital
$199,000
Less: accumulated depreciation
$476,000
Retained Earnings
$1,864,700
Net fixed assets
$1,478,000
Common Equity
2,063,700
Total assets
$2,737,700
Total liabilities and owner’s equity
$2,737,700
Income Statement, Year of 2012
Net sales (all credit)
$7,546,600.00
Less: Cost of goods sold
$6,112,746.00
Selling and administrative expenses
$349,000.00
Depreciation expense
$145,000.00
EBIT
$939,854.00
Interest expense
$49,500.00
Earnings before taxes
$890,354.00
Income taxes
$356,141.60
Net income
$534,212.40
Cash and marketable securities
$198,000
Accounts payable
$288,000
Accounts receivable
$469,000
Notes payable
$65,000
Inventories
$577,000
Accrued expenses
$84,000
Prepaid expenses
$15,700
Total current liabilities
$437,000
Total current assets
$1,259,700
Long-term debt
$237,000
Gross fixed assets
$1,954,000
Par value and paid-in-capital
$199,000
Less: accumulated depreciation
$476,000
Retained Earnings
$1,864,700
Net fixed assets
$1,478,000
Common Equity
2,063,700
Total assets
$2,737,700
Total liabilities and owner’s equity
$2,737,700
Explanation / Answer
Cash conversion cycle = (Days Inventory outstanding + Days sales outstanding - Days payables outstanding) * 365 Days inventory outstanding = Inventory / Cost of sales Days sales outstanding = Accounts receivable / Net credit sales Days payable outstanding = Accounts payable / Cost of sales Days inventory outstanding = 577000 / 6112746 = 0.0944 Daays sales outstanding = 469000 / 7546600 = 0.0621 Days payable outstanding = 288000 / 6112746 = 0.0471 Cash conversion cycle = (0.0944 + 0.0621 - 0.0471) * 365 = 0.1094 * 365 = 39.93
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