JW, Inc.: Income Statement Sales CGS Gross Profit Operating Expenses Depreciation EBIT Interest Expense EBT Taxes NI Dividends ARE 2016 $ 5,700.00 ($ 4,560.00) $ 1,140.00 ($ 500.00) ($ 27.00) $ 613.00 ($ 35.00) $ 578.00 ($ 231,20) $ 346.80 2015 $ 5,050.00 ($ 4,040.00) $ 1,010.00 ($ 420.00) ($ 26,00) $ 394.00 ($ 30.00) S 364.00 ($ 145.60) $ 218.40 $- $ 218.40 $ 346.80 JW, Inc.: Balance Sheet Cash and Equivalents Accounts Receivable Inventory Total Current Assets Fixed Assets Accumulated Depreciation Net Fixed Assets Total Assets 2016 $ 714.80 $ 500.00 $ 300.00 $ 1,514.80 $ 660.00 ($ 227.00) $ 433.00 $ 1,947.80 2015 $ 120.00 $ 500.00 $ 340.00 $ 960.00 $ 800.00 ($ 200.00) $ 600.00 $ 1,560.00 Accounts Payable $ 320.00 $ 300.00 JW, Inc.: Balance Sheet Cash and Equivalents Accounts Receivable Inventory Total Current Assets Fixed Assets Accumulated Depreciation Net Fixed Assets Total Assets 2016 $714.80 $ 500.00 $ 300.00 $ 1.514.80 $ 660.00 ($ 227.00) $ 433.00 $ 1,947.80 2015 $ 120.00 $ 500.00 $ 340.00 $ 960.00 S 800.00 ($ 200.00) $ 600.00 $ 1,560.00 Accounts Payable Short-Term Notes Payable Accruals Total Current Liabilities Long-Term Debt Total Liabilities $ 320.00 $ 40.00 $ 11.00 $ 371.00 $ 780.00 $ 1.151.00 $ 300.00 $50.00 $10.00 $ 360.00 $ 750.00 $ 1,110,00 Common Stock Retained Earnings Total Shareholders' Equity $ 120.00 $ 676.80 $ 796.80 $ 120.00 $330.00 $ 450.00 Liabilities and Shareholders' Equity $ 1,947.80 $ 1,560.00 1. Calculate JW's CCE, Cash Ratio, DCH, and NLB, and interpret the 2-year trend in these mea- sures. How would you describe JW's liquidity position? 2. Suppose that the JW's treasurer has targeted a DCH of 250 days for the next fiscal year. a. Assuming that CGS are expected to remain unchanged from 2016, then what change (increase or decrease) in cash would be warranted? b. Assuming that cash holdings will remain unchanged from 2016, then what change (increase or decrease) in CGS would be warranted? 3. In an interview on CNBC, a major shareholder of JW's common stock (a known activist inves- tor) stated that JW's management is holding too much cash and that some of this liquidity should be reinvested in the firm. Consequently, the CFO will lower the Cash Ratio by using cash and equivalents to purchase operating assets (i,e, the firm's total asset base will not change). What level of cash and equivalents is required to generate the following values for the Cash Ratio? a. 20% b. 15% 10% d. 5% c. 4. JW's shareholders are once again causing problems. This time, the issue concerns the CCE. Shareholders want to see the firm become more efficient at turning revenues into operating cash flow. Assuming that revenues remain unchanged from fiscal year 2016, what level of operating cash flow will be required to generate the following values for the CCE? a. 10%? b. 15% 20% d. 25% c. 5. JW's treasurer has just decided to incorporate the concept when evaluating the firm's liquid- ity position. In addition to the information provided by the financial statements, what other variables would also be needed to calculate JW's A
