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7. Analyzing accounting data for managerial decisions Accounting data are used to analyze cash flows, and this analysis is critical for decision making. Consider the following case: J&H Corp. recently hired Jeffrey. His immediate mandate was to analyze the company. He has to submit a report on the company's operational efficiency and estimate potential investment in working capital. He has the income statement from last year and the following information from the company's financial reports as well as some industry averages. Last year, J&H Corp. reported a book value of $600 million in current assets, of which 15% is cash, 17% is short-term investments, and the rest is accounts receivable and inventory. The company reported $510.0 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 $960 million in long-term assets last year. Income Statement For the Year Ended on December 31 (Millions of dollars) J&H Industry Corp. Average Net sales $4,500 $5,625 Operating costs, except depreciation and 3,600 4,500 amortization Depreciation and amortization 180 225 Total operating costs 3,780 4,725 Operating income (or EBIT) $720 $900 Less: Interest 72 135 Earnings before taxes (EBT) $648 Less: Taxes (40%) 259 306 Net income $389 $459 $765 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. The company has $498.0 million in operating assets and $510.0 million in operating liabilities. J&H Corp.'s net operating working capital is $90.0 million. J&H Corp.'s total net operating capital consists of its net operating working capital and total investment in long-term assets. J&H Corp. has -$12.0 million of noninterest-bearing current assets net of noninterest- charging liabilities. J&H Corp.'s NOPAT is $432.0 million, which is lower than the industry average of $540.0 million. 7. Analyzing accounting data for managerial decisions Accounting data are used to analyze cash flows, and this analysis is critical for decision making. Consider the following case: J&H Corp. recently hired Jeffrey. His immediate mandate was to analyze the company. He has to submit a report on the company's operational efficiency and estimate potential investment in working capital. He has the income statement from last year and the following information from the company's financial reports as well as some industry averages. Last year, J&H Corp. reported a book value of $600 million in current assets, of which 15% is cash, 17% is short-term investments, and the rest is accounts receivable and inventory. The company reported $510.0 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 $960 million in long-term assets last year. Income Statement For the Year Ended on December 31 (Millions of dollars) J&H Industry Corp. Average Net sales $4,500 $5,625 Operating costs, except depreciation and 3,600 4,500 amortization Depreciation and amortization 180 225 Total operating costs 3,780 4,725 Operating income (or EBIT) $720 $900 Less: Interest 72 135 Earnings before taxes (EBT) $648 Less: Taxes (40%) 259 306 Net income $389 $459 $765 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. The company has $498.0 million in operating assets and $510.0 million in operating liabilities. J&H Corp.'s net operating working capital is $90.0 million. J&H Corp.'s total net operating capital consists of its net operating working capital and total investment in long-term assets. J&H Corp. has -$12.0 million of noninterest-bearing current assets net of noninterest- charging liabilities. J&H Corp.'s NOPAT is $432.0 million, which is lower than the industry average of $540.0 million
