Question

12. The following financial information is available for Galveston Industrial, Inc. Galveston uses the FIFO inventory method.

Consolidated Statements of Ops (USD $)
In Thousands	Dec. 27, 2014	Dec. 28, 2013	Dec. 29, 2012
NET SALES	$768,451	$650,867	$503,443
Cost of sales	$587,962	$489,140	$379,890
GROSS PROFIT	$180,489	$161,727	$123,553
Selling and administrative expenses	$176,114	$144,058	$119,994
Other operating expense, net	$1,709	$934	$129
Facility consolidation expenses	$10,421	$0	$0
Impairment of assets	$2,141	$0	$0
OPERATING INCOME (LOSS)	($9,896)	$16,736	$3,430
Interest expense	$8,131	$7,099	$5,946
Other (income) expense, net	($291)	$49	($524)
Gain on purchase of businesses	($20,998)	$0	$0
Refinancing expenses	$0	$178	$0
INC (LOSS) FROM CONT OPS BEFORE TAXES	$3,262	$9,410	($1,992)
Income tax provision (benefit)	$1,990	($1,091)	($758)
INCOME (LOSS) FROM CONTINUING OPS	$1,272	$10,501	($1,234)
Loss from discontinued operations, net of tax	($1,149)	($503)	($518)
Loss on disposal of disc ops, net of tax	($2,773)	$0	$0
NET INCOME (LOSS)	($2,650)	$9,998	($1,752)
Consolidated Balance Sheets	Dec. 27, 2014	Dec. 28, 2013
In Thousands
CURRENT ASSETS
Cash and cash equivalents	$745	$482
Receivables, net	$95,490	$83,279
Inventories	$196,951	$176,184
Prepaid expenses	$11,283	$10,641
Deferred income taxes	$24,045	$12,516
TOTAL CURRENT ASSETS	$328,514	$283,101
PROPERTY, PLANT AND EQUIPMENT, NET	$193,704	$140,777
OTHER ASSETS	$46,445	$46,479
TOTAL ASSETS	$568,663	$470,357
CURRENT LIABILITIES	$0	$0
Accounts payable	$41,784	$40,973
Accrued expenses	$55,390	$49,522
Current portion of long-term debt	$17,157	$11,773
TOTAL CURRENT LIABILITIES	$114,332	$102,268
LONG-TERM DEBT	$223,417	$192,325
DEFERRED INCOME TAXES	$17,721	$7,696
OTHER LONG-TERM LIABILITIES	$37,467	$34,311
TOTAL LIABILITIES	$392,937	$336,600

A Estimate how long, on average, it took Galveston Industrial to pay its inventory suppliers in 2014

B Refer to the financial information for Galveston Industrial, Inc. Estimate how long, on average, it took Galveston to collect cash from customers. Choose the best answer rounded to a whole number.

Answer 1

1. Average time to pay to supplier = Trade payable/credit purchase x 365

= 25.94 or 26 days

*Assuming opening inventory and Opening accounts payable are equal to closing inventory and payables.

** Assuming all cost of sales are credit purchase

2. Average time to collect from debtor = Trade receivable/ credit sales x 365

= 95490/768451 x365 = 45.36 or 45 days