Use the income statement and balance sheet provided below to answer the followin
ID: 2791228 • Letter: U
Question
Use the income statement and balance sheet provided below to answer the following questions:
Notes: The financial statements correspond to the Boeing Corporation (Boeing is an airplane manufacturer)
Assume purchases equal COGS
a. The average age of the inventory is days
b. The average collection period is days
c. The average payment period is days
d. Boeing's operating cycle is days
e. Boeing's cash conversion cycle is days
f. Based on the CCC you estimated in letter e., which of the following is true?
A. Boeing has a cash outflow before a cash inflow
B. Boeing has a cash inflow before a cash outflow
g. The amount of resources Boeing has invested in the CCC is $ million
h. If Boeing reduces the average age of inventory to 150 days, the new CCC would be days
i. Based on the CCC you estimated in letter h., which of the following is true?
A. Boeing has a cash outflow before a cash inflow
B. Boeing has a cash inflow before a cash outflow
Income Statement (All numbers in millions) Revenue Sales COGS Gross Profit Operating Expenses Research Development Selling General and Administrative Operating Income or Loss Income from Continuing Operations Total Other Income/Expenses Net 12/31/2016 94,571 80,790 13,781 4,627 3,313 5,834 Earnings Before Interest and Taxes 5,874 Interest Expense Income Before Tax Income Tax Expense Minority Interest Net Income 306 5,568 673 60 4,895 Balance Sheet (All numbers in millions) Period Ending Current Assets Cash And Cash Equivalents Short Term Investments Accounts Receivable Inventory Total Current Assets Current Liabilities Accounts Payable Short/Current Long Term Debt Total Current Liabilities 12/31/2016 8,801 1,228 9,260 43,199 62,488 49,750 384 50,134Explanation / Answer
average age of the inventory = (43199 / 80790) * 365 = 195.17 days
average collection period = (9260 / 94571) * 365 = 35.74 days
average payment period = (49750/ 80790) * 365 = 224.76 days
operating cycle = 195.17 + 35.74 = 230.91 days
cash conversion cycle = 195.17 + 35.74 - 224.76 = 6.14 days
f)
As CCC is positive
Boeing has a cash outflow before a cash inflow (Option A)
g)
amount of resources = 43199 + 9260 - 49750 = 2709
h)
cash conversion cycle = 150 + 35.74 - 224.76 = -39.02 days
i)
As CCC is nesitive
Boeing has a cash intflow before a cash outflow (Option B)
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