Demonstrate your understanding of financial concepts by completing the following calculations related to Jones Inc. and then evaluating the firm's financial condition and performance.

To complete this assessment, use the information in theFinancial Assessments Template, which is linked in the Resources under the Required Resources heading. Review the financial statements for Jones Inc. and the comparative financial ratios for the year-end review. Enter your calculations and written analysis directly into the template, and show or explain your work where appropriate.

Problem 1.Calculate the firm's 2015 financial ratios for liquidity, activity (asset management), leverage (debt), and profitability.

Problem 2.Analyze the firm's performance from both time-series and cross-sectional points of view using the key financial ratios provided in the template.

Problem 3.Calculate the operating cash flow based on your review of the firm's income statement.

• How does operating cash flow (OCF) compare to free cash flow (FCF)?
• Why is the free cash flow so meaningful to management and investors?

Problem 4.Calculate the sustainable growth rate based on your calculations of return on equity (ROE) and assuming a 60 percent dividend-payout ratio. How can a company increase its sustainable growth rate?

Problem 5.Evaluate the firm's overall financial condition and performance based on your analysis and then address these questions:

• Is the company improving or deteriorating over this three-year period?
• How does your ratio analysis justify your interpretation?

Problems 1 and 2 BALANCE SHEET Assets Cash and Equivalents Accounts Receivable Inventory Total Current Assets Gross Fixed Assets Less Accumulated Depreciation Net Fixed Assets Total Assets 2015 $ $ INCOME STATEMENT Sales Revenue Cost of Sales Gross Profits Total Operating Profit Less: Interest Expense Net Profits Before Taxes Less Taxes (40%) Net Profits After Taxes $ $ $ 237,500.00 592,500.00 607,500.00 1,437,500.00 $ $ 1,062,000.00 2,500,000.00 $ $ $ $ $ $ 222,500.00 422,500.00 217,500.00 862,500.00 470,000.00 1,332,500.00 $ $ $ $ 637,500.00 530,000.00 1,167,500.00 2,500,000.00 $ $ $ 3,360,000.00 2,724,960.00 635,040.00 $ 462,400.00 $ $ $ $ $ 172,640.00 31,200.00 141,440.00 56,576.00 84,864.00 1,250,000.00 187,500.00 Liabilities and Equity Current Liabilities Accounts Payable Notes Payable Accruals Total Current Liabilities Long Term Debt Total Liabilities Stockholder's Equity Common Stock Retained Earnings Total Stockholders Equity Total Liabilities & Equity Less: Operating Expenses Selling Expense General S&A Depreciation Total Operating Expenses $ $ $ $ 251,200.00 163,200.00 48,000.00 LIQUIDITY RATIOS Current Ratio Quick Ratio Operating Cash Flow ASSET MANAGEMENT RATIOS Inventory Turnover Average Collection Period Fixed Asset Turnover Total Asset Turnover DEBT MANAGEMENT RATIOS Debt Ratio Times Interest Earned PROFITABILITY RATIOS Gross Profit Margin Operating Profit Margin Net Profit Margin Return on Investment Return on Equity End of worksheet 2013 1.5 0.9 n/a 2014 1.7 1 2015 Industry Average 1.6 0.9 2014 5 50 2015 Industry Average 8.4 40 n/a 2013 6 40 n/a n/a 1.5 1.5 1.75 2013 60% 2.5 2014 56% 3.5 2015 Industry Average 50% 4 2013 20% 4.70% 2% 3.00% 7.50% 2014 19.70% 4.80% 2.30% 3.50% 7.95% 2015 Industry Average 20% 6% 3% 5.25% 10.50% ndustry Average ndustry Average ndustry Average ndustry Average INSTRUCTIONS: Analyze the firm's performance from both time-series and cross-sectional points of view using the key financial ratios provided. PROVIDE YOUR WRITTEN ANALYSIS IN THIS COLUMN. Problem 3 INSTRUCTIONS: Calculate the operating cash flow based on your review of the firm's income statement. How does operating cash flow (OCF) compare to free cash flow (FCF)? Why is the free cash flow so meaningful to management and investors? = [EBIT (1 - T)] + depreciation OCF EBIT = EARNINGS BEFORE INTEREST AND TAXES T = TAX RATE FCF = OCF - net fixed asset investment* - net current asset investment** PLEASE PROVIDE YOUR ANSWERS HERE. Problem 4 INSTRUCTIONS: Calculate the sustainable growth rate based on your calculations of return on equity (ROE) and assuming a its sustainable growth rate? PLEASE PROVIDE YOUR ANSWERS HERE. tions of return on equity (ROE) and assuming a 60 percent dividend-payout ratio. How can a company increase Problem 5 INSTRUCTIONS: Evaluate the firm's overall financial condition and performance based on your analysis and then address th Is the company improving or deteriorating over this three-year period? How does your ratio analysis justify your interpretation? PLEASE PROVIDE YOUR ANSWERS HERE. your analysis and then address these questions