J&H Corp. recently hired Jeffrey. His immediate mandate was to analyze the company. He has to submit a report on the companys operational efficiency and estimate potential investment in working capital. He has the income statement from last year and the following information from the companys financial reports as well as some industry averages.

	Last year, J&H Corp. reported a book value of $300 million in current assets, of which 25% is cash, 27% is short-term investments, and the rest is accounts receivable and inventory.
	The company reported $255.0 million of current liabilities including accounts payable and accruals. Interestingly, the company had no notes payable claims last year. There were no changes in the accounts payables during the reporting period.
	The company, however, invested heavily in plant and equipment to support its operations. It reported a book value of $480 million in long-term assets last year.

Income Statement For the Year Ended on December 31 (Millions of dollars)
	J&H Corp.	Industry Average
Net sales	$4,100	$5,125
Operating costs, except depreciation and amortization	3,280	4,100
Depreciation and amortization	164	205
Total operating costs	3,444	4,305
Operating income (or EBIT)	$656	$820
Less: Interest	66	123
Earnings before taxes (EBT)	$590	$697
Less: Taxes (40%)	236	279
Net income	$354	$418

Based on the information given to Jeffrey, he submits a report on January 1 with some important calculations for management to use, both for analysis and to devise an action plan. Which of the following statements in his report are true? Check all that apply.

1) The firm uses $444.0 million of total net operating capital to run the business.

2) Based on the information on industry averages, J&H Corp. would generate higher profits than the other players in the industry if all players were of a similar size and had no debt or held no financial assets.

3) The company is using -$36.0 million in net operating working capital acquired by investor-supplied funds.

4) The company has no notes payable reported in its balance sheet, so all its current liabilities are its operating liabilities.

5) Based on the information on industry averages, other players in the industry would generate higher profits than J&H Corp. if they had no debt and held no financial assets.

You are an industry analyst for the telecom sector. You are analyzing financial reports from two companies: Talker Corp. and MobileTalk Inc. Corporate tax for both firms is 35%. Your associate analyst has calculated and compiled, in the following table, a list of important figures you need for the analysis:

Data Collected

	Talker Corp.	MobileTalk Inc.
EBIT	$164,000	$60,000
Depreciation	$54,120	$19,800
Total operating capital	$720,000	$374,400
Net investment in operating capital	$360,000	$156,000
WACC	11.85%	11.88%

In your analysis, you want to look for several characteristicsone of them being the return on invested capital (ROIC). Using the information available, complete the following statements:

	The net operating profit after tax (NOPAT) for Talker Corp. is ??????????? , whereas the NOPAT for MobileTalk Inc. is ?????????? .
	Talker Corp. has a free cash flow of ???????????? , whereas, MobileTalk Inc. has a free cash flow of ????????? .
	Talker Corp. has a ???????? return on invested capital than MobileTalk Inc. has.

Your inference from the analysis is that both firms are in a high-growth phase, and their growth will be profitable. Considering your analysis, which of the following statements is true?

1) If a company has negative NOPAT but a positive free cash flow, then the firm could be in a high-growth phase and making investments in operating capital to support growth.

2) If a company has positive NOPAT but a negative free cash flow, then the firm could be in a high-growth phase and making investments in operating capital to support growth.