Canadian Bacon Inc. financial statements are presented in the table below. Based
ID: 2727799 • 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, 2015
Cash and marketable securities
$187,000
Accounts payable
$217,000
Accounts receivable
$498,000
Notes payable
$51,500
Inventories
$799,000
Accrued expenses
$58,300
Prepaid expenses
$19,300
Total current liabilities
$326,800
Total current assets
$1,503,300
Long-term debt
$215,400
Gross fixed assets
$1,978,000
Par value and paid-in-capital
$128,000
Less: accumulated depreciation
$478,000
Retained Earnings
$2,333,100
Net fixed assets
$1,500,000
Common Equity
2,461,100
Total assets
$3,003,300
Total liabilities and owner’s equity
$3,003,300
Income Statement, Year of 2015
Net sales (all credit)
$5,386,600.00
Less: Cost of goods sold
$3,716,754.00
Selling and administrative expenses
$329,000.00
Depreciation expense
$138,000.00
EBIT
$1,202,846.00
Interest expense
$39,600.00
Earnings before taxes
$1,163,246.00
Income taxes
$465,298.40
Net income
$697,947.60
Cash and marketable securities
$187,000
Accounts payable
$217,000
Accounts receivable
$498,000
Notes payable
$51,500
Inventories
$799,000
Accrued expenses
$58,300
Prepaid expenses
$19,300
Total current liabilities
$326,800
Total current assets
$1,503,300
Long-term debt
$215,400
Gross fixed assets
$1,978,000
Par value and paid-in-capital
$128,000
Less: accumulated depreciation
$478,000
Retained Earnings
$2,333,100
Net fixed assets
$1,500,000
Common Equity
2,461,100
Total assets
$3,003,300
Total liabilities and owner’s equity
$3,003,300
Explanation / Answer
Cash Conversion cycle = Days inventory outstanding + Days sales outstanding - Days Payable outstanding
1) Days inventory outstanding = 365 * Inventory / Cost of sales
= 365 * 799000 / 3716754
= 78.46 Days
2) Days Sales oustanding = 365 * Account receivable / Net Credit Sales
= 365 * 498000 / 5386600
= 33.74 Days
3) Days payable oustanding = 365 * Accounts payable / Cost of sales
= 365 * 217000 / 3716754
= 21.31 Days
Accordingly, Cash Conversion cycle = 78.46 + 33.74 - 21.31 = 90.89 Days
Conclusion:- Cash conversion cycle = 90.89 Days [91 Days approximately].
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.