Self Assessment
Self-Assessment HW8D (Operating Cycle and Cash
Conversion cycle)
Question 1
a) Iberian Ham Inc. financial statements are presented in the table below.
Based on the information in the table, and using a 365-day year, calculate operating cycle.
Round the answers to two decimal places
Balance Sheet December 31, 20XX
Cash and marketable
$100,000 Accounts payable $200,000
securities
Accounts receivable $300,000 Notes payable $50,000
Inventories $500,000 Accrued expenses $60,000
Prepaid expenses $10,000 Total current liabilities $310,000
Total current assets $910,000 Long-term debt $300,000
Par value and paid-in-
Gross fixed assets $1,600,000 $200,000
capital
Less: accumulated
$400,000 Retained Earnings $1,300,000
depreciation
Net fixed assets $1,200,000 Common Equity 1,500,000
Total liabilities and
Total assets $2,110,000 $2,110,000
owner’s equity
Income Statement, Year of 20XX
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, Net sales (all credit) $4,000,000.00
Less: Cost of goods sold $2,800,000.00
Selling and administrative
$300,000.00
expenses
Depreciation expense $100,000.00
EBIT $800,000.00
Interest expense $30,000.00
Earnings before taxes $770,000.00
Income taxes $308,000.00
Net income $462,000.00
Your Answer:
Question 1 options:
Answer
Hide Check my answer
Step 1: Average Day’s Cost of Goods Sold = COGS/365 = $7,671.23
Step 2: Days of Sales in Inventory = Inventories / Average Day's Cost of Good Sold =
$500,000/$7,671.23 = 65.18
Step 3: Average Credit Sales per Day = Credit Sales/365 = $4,000,000/365 = $10,958.90
Step 4: Days of Sales in Receivables = Accounts Receivable / Average Credit Sales per Day =
$300,000 /$10,958.90 = 27.38
Step 5: Operating cycle = result of step 2 + result of step 4 = 65.18 + 27.38 = 92.55
Question 2
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Self-Assessment HW8D (Operating Cycle and Cash
Conversion cycle)
Question 1
a) Iberian Ham Inc. financial statements are presented in the table below.
Based on the information in the table, and using a 365-day year, calculate operating cycle.
Round the answers to two decimal places
Balance Sheet December 31, 20XX
Cash and marketable
$100,000 Accounts payable $200,000
securities
Accounts receivable $300,000 Notes payable $50,000
Inventories $500,000 Accrued expenses $60,000
Prepaid expenses $10,000 Total current liabilities $310,000
Total current assets $910,000 Long-term debt $300,000
Par value and paid-in-
Gross fixed assets $1,600,000 $200,000
capital
Less: accumulated
$400,000 Retained Earnings $1,300,000
depreciation
Net fixed assets $1,200,000 Common Equity 1,500,000
Total liabilities and
Total assets $2,110,000 $2,110,000
owner’s equity
Income Statement, Year of 20XX
This study source was downloaded by 100000872281541 from CourseHero.com on 10-01-2023 17:16:11 GMT -05:00
https://www.coursehero.com/file/56194719/FINC-330-Homework-8d-tutorialdocx/
, Net sales (all credit) $4,000,000.00
Less: Cost of goods sold $2,800,000.00
Selling and administrative
$300,000.00
expenses
Depreciation expense $100,000.00
EBIT $800,000.00
Interest expense $30,000.00
Earnings before taxes $770,000.00
Income taxes $308,000.00
Net income $462,000.00
Your Answer:
Question 1 options:
Answer
Hide Check my answer
Step 1: Average Day’s Cost of Goods Sold = COGS/365 = $7,671.23
Step 2: Days of Sales in Inventory = Inventories / Average Day's Cost of Good Sold =
$500,000/$7,671.23 = 65.18
Step 3: Average Credit Sales per Day = Credit Sales/365 = $4,000,000/365 = $10,958.90
Step 4: Days of Sales in Receivables = Accounts Receivable / Average Credit Sales per Day =
$300,000 /$10,958.90 = 27.38
Step 5: Operating cycle = result of step 2 + result of step 4 = 65.18 + 27.38 = 92.55
Question 2
This study source was downloaded by 100000872281541 from CourseHero.com on 10-01-2023 17:16:11 GMT -05:00
https://www.coursehero.com/file/56194719/FINC-330-Homework-8d-tutorialdocx/
