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APPLY YOUR KNOWLEDGE Serial Case tios and earnings quality for a 4,5 C12-71 (Learning Objectives 4, 5: Calculate and analyze ra company in the restaurant industry) textbook To follow are The Cheesecake Factory Incorporated's financial statements from its 2016 Note: This case is part of The Cheesecake Factory serial case contained in every chapter in this Form 10-K. A1 The Cheesecake Factory Incorporated Consolidated Statements of Income: Condensed and adapted for educational (In thousands) use Fiscal Year 2016 20152014 2275 719 s 2100609 s1 976 624 s 1,877,910 4 Revenues 2013 Costs and expenses: 6 Cost of sales 7 Labor expenses 526,628 504,031 490,306 455 8 Depreciation and amortization expense 88010 660.951 82,835 78,558 759,998 684,818 646,102 603,069 Other expenses 700,09085563.612,650 -579.644 2014126 1935363 1831.893 1,116956 160,954 10 Total costs and expenses 11 Income from operations 12 Interest and other expense, net 13 Income before income taxes 200993 165,246 144,731 14 Income tax expense 15 Net income 16 17 Note Financial information presented here should not be used for investment decisions 18 92251 (5,894) | (6,187) 191,768 159,352 138,544 52,274 42,8293 139,494 $ 116,523 101,2765 92 4,504 156,450 42,094 114,356 37,268 Data from the U.S. Securities and Exchange Commission EDGAR Company filings, www.sec.gov Financial Statement Analys Consolidated Balance Sheets: Condensed and adapted for educational use except share January 3, 2011 December 29,2015 December 30,2014 Assets urment assets Carsh and cash equivalents ounts receva Income tax 018 170 receivables 14159 2658 al current assets 38 2 Property and equipment, net net 828.305 rent 881 Total other assets Total assets es and Stockholders Equity Accounts payable Other accrued ex 1564 current liabiliti Noncurrent liabilities Preferred stock 931 Ational paid-in capital 1238.012 409 889 otal stoc TI,nmUni taat liabilities and stockholders equityT ii here should not be used for investment decisions pw alom te US Securities and Eschange Commission EDGAR Conparty flings, Pecceding financial statements have been condensed and adapted for educational use and treld not be used for investment decisions. Requirements tal figure mean? Did The Cheesecake Factory's net working capital or decrease from 2015 to 2016? Explain. Calculate The Cheesecake Factory's net working capital for 2015 and 2016. What does the 2 Calculate The inprove or de Cheesecake Factory's quick ratio for 2015 and 2016. Did the quick ratio mprove or deteriorate? How would you mpe or dcheescake Factory's current r for 015 and 2016 Did the cuent atio mprove or deteriorate? Calculate Theeerjorate? ities? Eolu assess The Cheesecake Factory's overall ability to pay its current ces Explain. des inventory turnover for 2016. Next, calculate days' inventory outstanding. What S. Calculate ales. Nalounts receivable turnover for 2016. Assume all net revenue is from credit taulate calculate days' sales outstanding. What does this number mean? thut does dhounts payable turnover for 2016. Next, calculate days payable outstanding. S Calculate this number mean? 8. Calculate the cash conversion cycle (in days). Explain what this cash conversion cycle number means. e debt ratio increased or decreased? 9. Calculate the debt ratio for 2016 and for 2015. Has th 10. Calculate the times-interest-earned ratio for 2016. Use "interest and other expense, net 11. Calculate the following profitability ratios for 2016: as interest expense. What does this ratio mean? a. Gross margin percentage b. Operating income percentage c. Rate of return on sales d. Rate of return on assets 12. Comment on The Cheesecake Factory's profitability in 2016 based on the profitability 13. How would you evaluate the company's earnings quality? ratios you just calculated

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