The Hopewell Pharmaceutical Company's balance sheet and income statement for last year are as follows:
*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 .. 2,500
Other expenses ............... 800
Total expenses ............... $4,800
Earnings before taxes ............ 1,700
Taxes .................. 680
Earnings after taxes (net income) ....... $1,020
a. Determine Hopewell's cash conversion cycle.
b. Give an interpretation of the value computed in parta.