2100 solutions - ch14

Chapter 14: Financial Statement Analysis

Kimmel, Weygandt, Kieso, Trenholm

Financial Accounting, Second Canadian Edition

CHAPTER 14

Performance MeasurementASSIGNMENT CLASSIFICATION TABLE

Study ObjectivesQuestionsBriefExercisesExercisesAProblemsBProblems

1.Understand the con-

cept of sustainable earnings and indicate how irregular items are presented.1, 2, 3, 41, 2, 31, 2

2.Discuss the need for comparative analysis

and identify the tools

of financial statement analysis.5

3.Explain and apply

horizontal analysis.6, 7 4, 53, 5, 61A1B

4.Explain and apply

vertical analysis.6, 76, 7, 84, 62A 2B

5.Identify and calculate

ratios used to analyse liquidity, solvency,

and profitability.8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 199, 10, 11, 12, 13, 142, 7, 8, 9, 10, 11, 12, 13, 142A, 3A, 4A, 5A, 6A, 7A, 8A, 9A, 10A, 11A, 12A2B, 3B, 4B, 5B, 6B, 7B, 8B, 9B, 10B, 11B, 12B

6.Understand the concept of quality of earnings.20, 21, 22151510A, 11A, 12A10B, 11B, 12B

ASSIGNMENT CHARACTERISTICS TABLE

ProblemNumberDescriptionDifficultyLevelTimeAllotted (min.)

1APerform horizontal analysis and comment.Simple20-30

2APrepare vertical analysis, calculate selected ratios, and comment.Moderate20-30

3ACalculate ratios.Simple20-30

4ACalculate ratio and comment.Moderate30-40

5ACalculate ratios.Moderate50-60

6ACalculate ratios, and compare liquidity, profitability, and solvency for two companies.Moderate50-60

7ACalculate ratios and compare two companies, one on the verge of bankruptcy.Moderate50-60

8AAnalyse ratios.Moderate30-40

9ACalculate missing information using ratios.Moderate50-60

10ADetermine effect of transactions on ratios.Moderate30-40

11AAnalyse ratios.Moderate50-60

12AAssess effect of alternate accounting principles on ratios.Complex50-60

1BPrepare horizontal analysis and comment.Simple20-30

2BPrepare vertical analysis, calculate selected ratios, and comment.Moderate20-30

3BCalculate ratios.Simple20-30

4BCalculate ratio and comment.Moderate30-40

5BCalculate ratios.Moderate50-60

6BCalculate ratios, and compare liquidity, profitability, and solvency for two companies.Moderate50-60

7BCalculate ratios and compare two companies, one on the verge of bankruptcy.Moderate50-60

8BAnalyse ratios.Moderate30-40

9BCalculate missing information using ratios.Moderate50-60

10BDetermine effect of transactions on ratios.Moderate30-40

11BAnalyse ratios.Moderate50-60

12BAssess effect of alternate accounting principles on ratios.Complex50-60

ANSWERS TO QUESTIONS

1.The concept of sustainable earnings is defined as the normal level of earnings to be obtained in the future. It is the amount of regular earnings that a company can expect to earn from its normal operations. In order to distinguish a companys net earnings from its earning power, irregular items, such as discontinued operations and extraordinary items, are reported separately on the statement of earnings.

2.Item (f) would be reported as an extraordinary loss. Item (g) is debatable, depending on whether or not earthquakes are frequent in the location in question.

3.This would not be considered a favourable trend for Ingots Inc. The relevant earnings per share figures are the $3.26 in 2004 and the $2.99 in 2005. These figures indicate that, unless there was a sale of common shares, the earnings from the continuing operations of the company decreased during 2005. This should give the companys management some concern because they will not always be able to count on revenue or gains from irregular items.

4.(a)The effect will be negative for Robotics Inc., in that retained earnings is reduced. The change to an accelerated method of amortization means that there will be an increase in the amount of accumulated amortization. The journal entry will show a credit to Accumulated Amortization and a debit to Retained Earnings for the increased amortization expense (Cumulative Effect of Change in Accounting Principle).

(b)Changes in accounting principles are reported as an adjustment of opening retained earnings (net of income tax). The accelerated amortization method should be used in reporting the operating results for the current year and any previous periods reported for comparative purposes.

5.(a)Comparison of financial information can be made on an intracompany basis, an intercompany basis, and an industry average basis (or predetermined norms).

1.An intracompany basis compares the same item with prior periods, or with other financial items in the same period.

2.An intercompany basis compares the same item with other companies published reports.

3.The industry average and predetermined norm compare the item with the industry average as compiled by Dun & Bradstreet or by trade associations.

(b)1.The intracompany basis of comparison is useful in detecting changes in financial relationships and significant trends within a company.

2.The intercompany basis of comparison provides insight into a companys competitive position.

3.The industry average basis provides information as to a companys relative performance within the industry.

Questions (Continued)

6.Horizontal analysis (also called trend analysis) measures the dollar and percentage increase or decrease of an item over a period of time. In this approach, the amount of the item on one statement is compared with the amount of that same item on one or more earlier statements. Vertical analysis expresses each item within a financial statement in terms of a percent of a relevant total or other common basis within the same statement.

7.(a)$540,000 X 1.05 = $567,000, 2005 net earnings

(b)$540,000 6% = $9,000,000, 2004 revenue

8.(a)Liquidity ratios measure the short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash.

(b)Solvency ratios measure the companys ability to survive over a long period of time.

(c)Profitability ratios measure the earnings or operating success of an enterprise for a given period of time.

9.A high current ratio might be hiding liquidity problems with regards inventory or accounts receivable. For example, a high level of inventory will cause the current ratio to increase. Increases in inventory can be due to the fact that inventory is not selling and may be obsolete. Increases in the current ratio will also occur if the companys accounts receivable increase. An increase in accounts receivable could indicate the company is having trouble collecting its overdue accounts, which again would mean liquidity problems for the business.

10.The current ratio relates current assets to current liabilities. The acid-test ratio relates cash, short-term investments, and net receivables to current liabilities. The acid-test ratio provides additional information about short-term liquidity and is an important complement to the current ratio. The cash current debt coverage ratio assesses the ability of the entity to meet its current obligations and is a measure of the companys liquidity. The cash total debt coverage ratio is a measure of the companys ability to repay all its liabilities and is a measure of the companys solvency.

11.Bullock Ltd. likely has a collection problem with its receivables. However, the receivables turnover needs to be reviewed in light of other liquidity measures for the company. In addition, sometimes the receivables turnover for the industry can be misleading in that some companies encourage credit and revolving charge sales and slow collections in order to earn a healthy return on the outstanding receivables in the form of high rates of interest.

12.Joan is correct. A single ratio by itself may not be very meaningful and is best interpreted by comparison with (1) past ratios of the same enterprise, (2) ratios of other enterprises, or (3) industry norms or predetermined standards. In addition, other ratios of the enterprise are necessary to determine overall financial well-being.


13.The price earnings (P-E) ratio is a reflection of investors assessments of a companys future earnings. The P-E ratio takes into account such factors as relative risk, stability of earnings, trends in earnings, and the markets perception of the companys growth potential. In this question, investors favour the Bank of Montreal because it has the higher P-E ratio. The investors feel that the Bank of Montreal will be able to generate even higher future earnings and so the investors are willing to pay more for the shares.

14.The explanation for the difference relates to the fact that the company must be using some debt to finance their assets. The cost of debt is lower than the return being generated by the related assets. The extra return then accrues to the shareholders of the business thereby increasing their return on common shareholders equity. This concept is referred to as financial leverage.

15.In a growth company, the payout ratio is often low because the company is reinvesting earnings in the business.

16.(a)Asset turnover

(b)Inventory turnover, days in inventory

(c)Return on common shareholders equity

(d)Times interest earned

17.(a)The increase in profit margin is good news because it means that a greater percentage of net sales is going towards earnings.

(b)The decrease in inventory turnover signals bad news because it is taking the company longer to sell the inventory and consequently there is a greater chance of inventory obsolescence.

(c)An increase in the current ratio signals good news because the company improved its ability to meet maturing short-term obligations.

(d)The earnings per share ratio is a deceptive ratio. The decrease might be bad news to the company because it could mean a decrease in net earnings. Or the decrease might be good news to the company because of an increase in shareholders investment.

(e)The increase in the price earnings ratio is generally good news because it means that the market price per share has increased and investors are willing to pay that higher price for the shares.

(f)The increase in debt to total assets ratio is bad news because it means that the company has increased its obligations to creditors and has lowered its equity buffer.

(g)The decrease in the times interest earned is bad news because it means that the companys ability to meet interest payments as they come due has weakened.


18.(a)The times interest earned ratio (not cash interest coverage ratio), which is an indication of the companys ability to meet interest charges, and the debt to total assets ratio, which indicates the companys ability to withstand losses without impairing the interests of creditors.

(b)The current ratio and the acid-test ratio, which indicate a companys liquidity and short-term debt-paying ability.

(c)The earnings per share and the return on common shareholders equity, both of which indicate the earning power of the investment.

19.The cash current debt coverage ratio, cash total debt coverage ratio and the free cash flow all depend on cash based data rather than accrual based data.

20.If management wanted to increase earnings, it could decrease the amortization expense by increasing the estimated useful life of the asset used in the calculation of amortization.

21.Management of earnings through, for example, the changing of accounting estimates may lead to reported earnings that are confusing and misleading to users. For example, if a company changes its estimate of an assets useful life, amortization expense will change. The clarity and thoroughness of the earnings may be reduced which would lead to a lower quality of earnings.

22.(a)During a period of inflation, net earnings will be less under the average inventory cost flow assumption than it will be using the FIFO cost flow assumption because average costing results in the larger cost of goods sold amount.

(b)Inflation does not affect the amount of amortization taken (except through its effect on salvage) since the amortizable amount is based on the acquisition cost. A six-year life produces greater amortization for the first six years (thus, less net earnings) and less amortization in years 7, 8, 9 (thus, more net earnings in those years) than a nine-year life.

(c)Inflation does not affect the amount of amortization taken. Use of the straight-line method results in less amortization in the earlier years than the accelerated declining balance method but more amortization in the later years.

SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 14-1

OSBORN CORPORATION

Statement of Earnings (Partial)

Year Ended December 31, 2004

Discontinued operations

Loss from operations of Mexico facility, net

of $105,000 ($300,000 X 35%) income tax savings

$195,000

Loss on disposal of Mexico facility, net of

$56,000 ($160,000 X 35%) income tax savings

104,000($299,000)

BRIEF EXERCISE 14-2

LIMA CORPORATION


Year Ended November 30, 2004

Earnings before income taxes

$300,000

Income tax expense ($300,000 X 25%)

75,000

Earnings before extraordinary item

225,000

Extraordinary loss from flood, net of $15,000

($60,000 X 25%) income tax savings

(45,000)

Net earnings

$180,000

BRIEF EXERCISE 14-3

SHIRLI INC.

Statement of Retained Earnings (Partial)

For the Year Ended June 30, 2005

Retained earnings, July 1, 2004

$350,000

Deduct: Cumulative effect on prior years of change in amortization

method, net of $16,000 ($40,000 X 40%) income tax savings

24,000Retained earnings, July 1, 2004, as adjusted

$326,000

BRIEF EXERCISE 14-4

Horizontal analysis:

Dec. 31, 2004Dec. 31, 2003

Cash

Accounts receivable

Inventory

Noncurrent assets $150,000

85.7%*

$600,000

150%**

$780,000

130%***

$3,220,000

115%****$175,000

100%

$400,000

100%

$600,000

100%

$2,800,000

100%

* = 85.7%

** = 150% *** = 130%**** = 115%

BRIEF EXERCISE 14-5

Comparing the percentages presented results in the following conclusions: The net earnings for Tilden increased in 2004 because of the combination of an increase in sales and a decrease in both cost of goods sold and expenses. However, the reverse was true in 2005 as sales decreased, while both cost of goods sold and expenses increased. This resulted in a decrease in net earnings.

BRIEF EXERCISE 14-6

Vertical analysis20042003

AmountPercentage*AmountPercentage**

Cash

Accounts receivable

Inventory

Noncurrent assets

Total assets$ 150,000

600,000

780,000

3,220,000

$4,750,0003.2%

12.6%

16.4%

67.8%

100.0%$ 175,000

400,000

600,000

2,800,000

$3,975,0004.4%

10.0%

15.1%

70.4%

100.0%

* = 3.2%

** = 4.4%

= 12.6% = 10.0%

* =16.4%** = 15.1%

* = 67.8%** = 70.4%

BRIEF EXERCISE 14-7

200520042003

Sales

Less: Cost of goods sold

Operating expenses

Net earnings100.0%

59.2%

25.0%15.8%100.0%

62.4%

26.6%11.0%100.0%

64.5%

27.5%8.0%

Net earnings as a percent of sales for Waubons increased over the three-year period because cost of goods sold and operating expenses both decreased as a percent of sales every year.

BRIEF EXERCISE 14-8

(a)Working capital = Current assets current liabilities

= $845,683 $448,606

= $397,077

(b)Current ratio:

Current assets

Current liabilities

=

= 1.89:1

(b)Acid-test ratio:

Cash + Short-term investments

+ Accounts receivable

Current liabilities

=

= 0.51:1

BRIEF EXERCISE 14-9

Holyshs liquidity is likely deteriorating. The increase in the current ratio is likely caused by the increase in receivables due to the decline in the receivables turnover. This may mean that the company is not collecting its accounts receivable as effectively as in the past, or that some balances may be uncollectible. Further investigation into the cause for the slowdown in collections will have to be made before it is possible to assess the companys liquidity.

BRIEF EXERCISE 14-10

20022001

(a)Receivables turnover

= Net credit salesAverage accounts receivable

=

= 4.8 times

= 4.8 times

(b)Average collection period

= 365 days

Receivables turnover

= = 76 days= = 76 days

Management has maintained a similar pattern of collections over the past year. The company is taking 76 on the average to collect its accounts receivable, which is considerably longer than the credit terms of 60 days. The company probably needs to focus more effort on accounts receivable collection.


(a)Inventory turnover =

20042003

= 4.6 times

= 5.1 times

(b) Days in Inventory =

365

Inventory turnover

= 79 days EMBED Equation.3

= 72 days

Management should be concerned with the fact that inventory is moving slower in 2004 than it did in 2003. The decrease in the inventory turnover could be because of poor pricing decisions or because the company is stuck with obsolete inventory.


(a)Asset turnover =

=

= 2.37 times(b)Return on assets =

=

=

9%

(c)Profit margin =

=

= 3.8%BRIEF EXERCISE 14-13

Cash dividends

Payout ratio=

0.20=

X= ADVANCE \r 2 $56,000 x 0.20

= ADVANCE \r 2 $11,200

Average total assets

Return on assets=

0.16=

0.16X= ADVANCE \r 2 $56,000

X=

= ADVANCE \r 2 $350,000


(a)

= 0.14 times

(b)

= 0.10 times

(c) $6,200 $3,807 = $2,393


Increasing the estimated useful life will result in lower amortization expense and accumulated amortization and higher net earnings and total assets.

(a)Increase

(b)Decrease

(c)Decrease

SOLUTIONS TO EXERCISES

EXERCISE 14-1

(a)

DAVIS LTD.



Earnings from continuing operations

$270,000

Discontinued operations

Gain from operations of division, net of

$44,000 income taxes$66,000

Loss from disposal of division, net of

$28,000 income tax savings

(42,000)24,000

Earnings before extraordinary item

294,000

Extraordinary fire loss, net of $24,000 tax savings

(36,000)Net earnings

$258,000

(b)The effect of the cumulative change in accounting principle (item 3) would be presented directly in the Statement of Retained Earnings as an adjustment to opening retained earnings.

EXERCISE 14-2

(a)These items are listed separately so that the reader can evaluate the companys results on the basis of normal operations and also see the impact of irregular items. If only the net income figure was disclosed, the reader would not be able to evaluate what portion of the earnings came from operations and what portion came from irregular items.

(b) Revenue (in thousands):

Net income (in thousands):

(c) The profit margin should be based on the companys net income from its normal and continuous operations. The net income figure should be a more conservative amount and should not include any irregular items.

Profit margin (in thousands):

2002: (($10,317) + 8,100) $41,408 = -5.4%

2001: $1,111 $29,113 = 3.8%

These two figures are comparable because they are the end result of the companys operations and do not include any irregular items which only affect the year of their occurrence.

(d) Average number of shares = Net income EPS

2002: $(10,317,000) $(0.23) = 44,856,000 shares

2001: $1,111,000 $0.02 = 55,550,000 shares

Decrease in the average number of shares: 10,694,000 shares

EXERCISE 14-3

MERCHANDISE.COM INC.

Condensed Balance Sheet

December 31

Increase or

(Decrease)

20042003Amount%

Assets

Current assets

Noncurrent assets (net)

Total assets$120,000

400,000$520,000$ 80,000

350,000$430,000$40,000) 50,000)$90,000)(50.0%)(14.3%)(20.9%)

Liabilities

Current liabilities

Long-term liabilities

Total liabilities$91,000

144,000235,000$70,000

95,000165,000$21,000

49,000 70,000(30.0%)(51.6%)(42.4%)

Shareholders Equity

Common shares

Retained earnings

Total shareholders equity

Total liabilities and share-

holders equity

150,000

135,000285,000$520,000115,000

150,000265,000$430,00035,000

(15,000)

20,000)($90,000)(30.4%)(10.0%)

(7.5%)(20.9%)

EXERCISE 14-4

FLEETWOOD CORPORATION

Condensed Statement of Earnings

20042003

AmountPercentAmountPercent

Sales

Cost of goods sold

Gross profit

Operating expenses


Income tax expense

Net earnings$800,000

500,000300,000

200,000

100,000 25,000$ 75,000100.0%

62.5%37.5%

25.0%

12.5%

3.1% 9.4%$600,000

390,000210,000156,000

54,000

13,500$40,500100.0%

65.0%35.0%

26.0%

9.0%

2.3%6.7%

EXERCISE 14-5

(a)OLYMPIC CORPORATION

Statement of Earnings

Year Ended December 31

Increase or (Decrease)

20042003AmountPercentage

Net sales

Cost of goods sold

Gross profit

Operating expenses

Earnings before income tax

Income tax


440,000110,000

58,000

52,000

20,800

$ 31,200$550,000

450,000100,000

55,000

45,000

18,000

$27,000

$(10,000)

(10,000 3,000

7,000

2,800

$ 4,200)

(2.2%)

(10.0%)

(5.5%

15.6%

15.6%

15.6%

(b)OLYMPIC CORPORATION


Year Ended December 31

20042003

AmountPercentAmountPercent

Net sales

Cost of goods sold

Gross profit

Operating expenses

Earnings before income tax

Income tax


440,000110,000

58,000

52,000

20,800

$31,200100.0%

80.0%20.0%

10.5%

9.5%

3.8%

5.7%

$550,000

450,000100,000

55,000

45,000

18,000

$27,000100.0%

81.8%18.2%

10.0%

8.2%

3.3%

4.9%

EXERCISE 14-6

(a)MOUNTAIN EQUIPMENT CO-OPERATIVE

Balance Sheet

December 31

(in thousands)

20022001Increase

(Decrease)Percentage

Change

from 2001

Assets

Current assets

Deferred store pre-opening costs

Property, plant and equipment

Total assets$40,927

417

38,197

$79,541

$38,729

39,015

$77,744$2,198

417

(818)

$1,7975.7%

(2.1%)

2.3%

Liabilities and members equity

Current liabilities


Total liabilities

Members equity

Total liabilities and

members equity$23,560

34823,908

55,633$79,541$25,110

399

25,509

52,235$77,744($1,550)

(51)

(1,601)

3,398$1,797(6.2%)

(12.8%)

(6.3%)

6.5%

2.3%

EXERCISE 14-6 (Continued)

MOUNTAIN EQUIPMENT CO-OPERATIVE

Balance Sheet

December 31

(in thousands)

20022001

Assets

Current assets

Deferred store pre-opening costs

Property, plant and equipment

Total assets$40,927

417 38,197

$79,541

51.5%

0.5%

48.0%

100.0%$38,729

39,015

$77,74449.8%

0.0%

50.2%

100.0%

Liabilities and

members equity

Current liabilities


Total liabilities

Members equity

Total liabilities and

members equity$23,560

34823,908

55,633$79,54129.6%

0.4%

30.0%

70.0%

100.0%$25,110

399

25,509

52,235$77,74432.3%

0.5%

32.8%

67.2%

100.0%

(b) Current liabilities and long-term liabilities have decreased slightly and more assets are now being financed through members equity.

EXERCISE 14-7

(in thousands)

(a) Current ratio = 0.99:1 =

Acid-test ratio = 0.97:1 =

Cash current debt coverage = 0.11 times =

Receivables turnover = 17.7 times =

Average collection period = 20.6 days =

(b) Carlton University appears to be in a healthy position with regard to its liquidity. Both current and quick ratios are just under 1:1. Cash current debt coverage is perhaps a little low at 0.11 times. Receivables turnover and average collection period are good.

EXERCISE 14-8

(a)Current ratio as of February 1, 2005 = 3.25:1 ($130,000 $40,000).

Feb.33.25:1No change in total current assets or liabilities

72.63:1($105,000 $40,000)

112.63:1No change in total current assets or liabilities

143.50:1($91,000 $26,000)

183.27:1($85,000 $26,000)

243.34:1($86,800 $26,000)

(b)Acid-test ratio as of February 1, 2005 = 2.75:1 ($110,000 $40,000).

Feb.32.75:1No change in total quick assets or current liabilities

72.13:1($85,000 $40,000)

112.05:1($82,000 $40,000)

142.62:1($68,000 $26,000)

182.38:1($62,000 $26,000)

242.56:1($66,500 $26,000)EXERCISE 14-9

(a)The companys collection of its accounts receivables has deteriorated over the past several years as it is taking the company longer to collect as evidenced by the decrease in the accounts receivable turnover.

(b)The company is selling its inventory slower as the inventory turnover is declining.

(c)Overall, the companys liquidity has deteriorated. The increase in the current ratio is caused by the increase in inventory and receivables due to the slowdown in the movement of these assets. Even though the companys current ratio is higher, if the underlying assets cannot be converted to cash to repay current liabilities, then liquidity has deteriorated.

EXERCISE 14-10

(a)Current

= 2.9:1

(b)Acid-test

= 1.7:1

(c)Receivables turnover

= 5.6 times

(d)Average collection period ADVANCE \r 2 365 days 5.6 = 65.2 days

(e)Inventory turnover

= 3.6 times

(f) Days in inventory

365 = 101.4 days

3.6

(g)Cash current debt coverage

= 0.75 times

(h)Cash total debt coverage

= 0.26 times

(i)Debt to total assets

= 43.5%

(j)Return on common shareholders equity

= 8.5%

EXERCISE 14-11

(a)Profit margin

= 5.2%

(b)Asset turnover

= 1.30 times

(c)Return on assets

= 6.8%

(d)Return on common shareholders equity = 14.7%

(e)Times interest earned

= 5.36 times

(f)Earnings per share

= $1.06

EXERCISE 14-12

(a)Earnings per share

= $1.33

(b)Price-earnings

= 11.3 times

(c)Payout

= 47%

(d)Times interest earned

= = 6.4 times

(e)Gross profit margin

= 46%

(f)Profit margin

= 10.6%

EXERCISE 14-13

TransactionCurrent

ratio

(1.5:1)Cash current debt coverage

(0.4 times)Debt to total assets

(30%)Return on assets

(20%)

(a)Purchased merchandise inventory on account from supplier (perpetual inventory system).

DDDD

(b)Paid cash on account.IDII

(c)Sold merchandise on account to customers.INEII

(d)Customer paid its accountNEINENE

(e)Purchased equipment issuing long-term note payable in payment.NENEDD

(f)Paid interest expense and a portion of principle on the note payableDDDNE

EXERCISE 14-14

(a)Inventory turnover = 3.6 =

3.6 X $190,000 = Cost of goods sold

Cost of goods sold = $684,000

(b)Receivables turnover = 9.4 =

9.4 X $99,250 = Net sales (credit) = $932,950

(c)Return on common shareholders equity = 19% =

0.19 X $507,250 = Net earnings = $96,378

(d)Return on assets = 14% =

Average assets = = $688,414

= $688,414

Total assets (Dec. 31, 2004) = ($688,414 X 2) $605,000 = $771,828

EXERCISE 14-15

(a)The fact that the earnings have been so close to analysts expectations would make investors suspicious that management has selected accounting policies or made estimates, which have manipulated earnings so that the analysts expectations are met, and therefore the companys share price would not decline.

(b)Users are concerned that if management is manipulating the accounting figures to meet analysts expectations, the information may not be reliable and useful for decision-making.

SOLUTIONS TO PROBLEMS

PROBLEM 14-1A

(a)

AIR CANADA

(in millions)

$%$%$%$%

2002ChangeChange2001ChangeChange2000ChangeChange1999ChangeChange1998

Operating revenues $ 9,826 $215 2.2 $ 9,611$ 315 3.4 $9,296$2,85344.3$6,443 $545 9.2$5,898

Operating expenses 10,018 (324)(3.1)10,342 1,307 14.5 9,0352,96948.96,066 63 4.55,803

Nonrecurring expenses 31 52247.6(21) (199) (111.8)178216 (568.4) (38) (37)(3,700.0)(1)

Interest expense 221 (54)(19.6)275 65 31.0 2105636.4154 (20)(11.5) 174

Income tax 384 54 16.4 330 375 833.3(45)(166) (137.2) 121 155455.9 (34)

Net earnings (loss)$ (828) $487 37.0 $(1,315) $(1,233) (1,503.7) $ (82) $ (222) 158.6 $ 140 $184 418.2$ (44)

Current assets $1,771 $(464)(20.8)$ 2,235$ 60.3 $2,229$ 97177.2 $1,258$ 16615.2 $1,092

Total assets 7,416 (1,328)(15.2)8,744(988)(10.2)9,7323,02745.1 6,7052834.4 6,422

Current liabilities 2,592 (277)(9.7)2,869(691)(19.4)3,5602,155153.4 1,4051269.9 1,279

Total liabilities 9,704 (500)(4.9)10,2047888.4 9,4163,43657.5 5,9801,01520.4 4,965

Share capital 992 00.0 99200.0 99220.2 990(315) (24.1)1,305

Retained earnings (3,280)(828)33.8 (2,452)(1,776)(262.7) (676)(411)(155.1) (265)(417) (274.3)152

(b)The primary drivers of the decline are the flattening of operating revenues combined with the increase in operating expenses.

(c) Air Canada has been financing its operations primarily through debt.

PROBLEM 14-2A

(a)Condensed Statement of Earnings


Breau Ltd.Shields Ltd.

DollarsPercentDollarsPercent

Net sales

Cost of goods sold

Gross profit

Operating expenses

Earnings from operations

Other expenses and losses

Interest expense


Income tax expense


180,000 170,000

51,000 119,000

3,000 116,000

29,000$ 87,000100.0%

51.4%48.6%

14.6%34.0%

0.9% 33.1%

8.3%24.8%$1,400,000

720,000 680,000

272,000 408,000

10,000 398,000

100,000$ 298,000100.0%

51.4%48.6%

19.4%29.2%

0.7%28.5%

7.2%21.3%

(b)Breau: Return on Assets

$87,000 $457,500 = 19%

$87,000 is Breaus 2004 net earnings. $457,5001 is Breaus 2004 average assets:

120042003

Current assets

Noncurrent assets

Total assets

$130,000

405,000$535,000+$110,000

270,000$380,000=$915,000 2

PROBLEM 14-2A

(b)

(Continued)

Shields: Return on Assets

$298,000 $1,550,000

= 19.2%

$298,000 is Shields 2004 net earnings. $1,550,0002 is Shields 2004 average assets:

220042003

Current assets

Noncurrent assets

Total assets$ 700,000

1,000,000$1,700,000+$ 650,000

750,000$1,400,000=$3,100,000 2

Breau: Return on Common Shareholders Equity

$87,000 $342,500 = 25.4%

$87,000 is Breaus 2004 net earnings. $342,5003 is Breaus 2001 average shareholders equity:

320012000

Common shares

Retained earnings

SE$288,000

137,000$425,000+$210,000

50,000$260,000=$685,000 2

Shields: Return on Common Shareholders Equity

$298,000 $1,112,500 = 26.8%

$298,000 is Shields 2004 net earnings. $1,112,5004 is Shields 2004 average shareholders equity:

420012000

Common shares

Retained earnings

SE$ 677,000

573,000$1,250,000+$700,000

275,000$975,000=$2,225,000 2

(c)Shields Ltd. appears to be more profitable. ADVANCE \r 1 Shields return on assets of 19.2% is higher than Breaus return on assets of 19%, and Shields return on common shareholders equity of 26.8% is higher than Breaus return on common shareholders equity of 25.4%.

(a)Current ratio

= 1.33:1

(b)Acid-test ratio

= 0.76:1


= 7.57 times

(d)Average collection period 365 days 7.57 = 48.22 days


= 4.72 times

(f)Days in inventory 365 days 4.72 = 77.33 days


= 0.19 times

(h)Debt to total assets

= 28.75%

(i)Times interest earned

= 19.77 times

(j)Cash total debt coverage

= 0.15 times

PROBLEM 14-3A (Continued)

(k)Gross profit margin

= 43.6%

(l)Profit margin

= 17.9%

(m)Return on assets

= 19.62%

(n)Asset turnover

= 1.10 times

(o)Return on common shareholders equity

= 29.98%

(p)Earnings per share

= $9.31

(a)20042003

1.Profit margin

= 10.6% = 5.0%

2.Gross profit margin

= 44.7% = 42.9%

3.Asset turnover

= 0.98 times

= 1.2 times

4.Earnings per share

= $2.22 = $1.14

5.Price-earnings

= 3.60 times = 8.77 times

6.Payout

* = 24.0%

*$124,000 + $80,300 - $185,000 = $19,300** = 45.2%

**$105,000 + $34,650 - $124,000 = $15,650


(a) (Continued)

7.Debt to total assets

$348,000 = 37.3%

$933,000 = 24.4%

8.Current ratio

= 1.97:1

= 1.92:1

(b)The underlying profitability of the corporation has improved. For example, the profit margin and gross profit margin have both increased. In addition, the corporations earnings per share have increased, which suggests that investors will be looking more favourably at the corporation. However, its payout ratio has decreased, which may account for the decline in the price earnings ratio that occurred despite the increased profitability. The company is also less solvent as its debt to total assets has increased.

(a)Liquidity

20042003Change

Current = 2.08:1 = 3.09:1Deterioration

Acid-test = 0.69:1 = 1.08:1Deterioration

Cash current debt coverage $80,000

$249,375

= 0.32 times $65,000

$232,500

= 0.28 timesImprovement


= 10.20 times

= 10.80 timesDeterioration

Inventory turnover

= 1.76 times


An overall decrease in short-term liquidity occurred.

PROBLEM 14-5A

(a)(Continued)

Profitability

20042003Change

Return on common shareholders equity

= 11.3%

= 9.2%Improvement

Return on assets

= 7.4%

= 6.25%Improvement

Profit margin

= 8.63%

= 7.18%Improvement

Asset turnover

= 0.86 times

= 0.87 timesNo change

Gross profit margin

= 35.0%

= 32.4%Improvement

Earnings per share = $0.86 = $0.68Improvement

Overall profitability has improved.


(a)(Continued)

Solvency

20042003Change

Debt to total assets

= 39.8%

= 26.9%Deteriorated

Cash total debt coverage

= .20

= 0.19Improved

Overall solvency has deteriorated

*Total assets total shareholders equity = 2002 total debt

= $1,175,000 $740,000 = $435,000

Average total liabilities = ($265,000 + $435,000) 2 = $350,000

(b)20052004

1.Earnings per share = $1.21 = $0.86

2.Debt to total assets = 28.2% = 39.8%

3.Price-earnings = 5.0 times = 5.8 times

*100,000 + (6,500 x 6/12) = 103,250

**$125,000 100,000 = $1.25 (independent of #1)

(a)Ratio (Industry Average)INCOFALCONBRIDGE

(in millions)(in millions)

Liquidity

Current (1.2:1)

Acid-test (0.7:1)

Receivables turnover (8.3x)

Average collection period (44 days)

Inventory turnover (4.9x)

Days in inventory (74.5 days)

Solvency

Debt to total assets (40.1%)

Times interest earned (2x)

Cash total debt coverage (N/A)

Profitability

Profit margin (1.6%)

Asset turnover (0.5 times)

Return on assets (0.8%)

Return on common shareholders equity (2.3%)

Payout ratio (N/A)

2.1:1

($1,987 $930)

1.4:1

($1,338 $930)

8.19

($2,161 $264)

44.6

(365 8.19)

2.6

($1,377* $538)

140.4

(365 2.6)

55.4%($4,735 $8,540)

(41.4)

[(($2,120) + $50) $50]

0.13

($599 $4,514**)

(68.5%)[($1,481) $2,161]

0.24

($2,161 $9,064)

(16.3%) [($1,481) $9,064]

(32.5%) [($1,481) $4,550]

(1.8%)

[$26 ($1,481)]

2.5:1

($1,050 $424)

1.4:1

($602 $424)

7.95

($2,394 $301)

45.9

(365 8.0)

3.8

($1,733* $454)

96.1

(365 3.8)

56.1%($2,918 $5,204)

1.55

[($48 + $88) $88]

0.12

($341 $2,853**)

3.0%

[$73 $2,394]

0.47

($2,394 $5,136)

1.4%

[$73 $5,136]

3.2%

[$73 $2,283]

114%

($83 $73)

* Estimate, as operating expenses included

** Average total liabilities = Average total assets Average total shareholders equity


(b)The comparison of the two companies relative to the industry reveals the following:

LiquidityFalconbridges liquidity is better than the industry average and Inco. Its current ratio is higher although Inco and Falconbridge's acid test ratios are nearly identical at double the industry average. The management of its accounts receivable is worse than Incos and the industry average. However, this is offset somewhat by its inventory performance, which is better than Incos but still below that of the industry.

SolvencyThe companies are reasonably comparable in terms of debt to total assets and cash total debt coverage solvency measures. Falconbridges cash-based solvency is slightly lower than Incos, even though it is carrying a higher proportion of debt to total assets than is Inco. Both companies are less solvent than the average firm in the industry.

ProfitabilityFalconbridge is significantly more profitable than both Inco and the average company in the industry. Inco is operating at a loss while Falconbridge had positive net earnings.

(a)RatioCompany A

(in millions)Company B

(in millions)

1.

2.

3.

4.

5.

6.

7.

8.

Current ratio

Acid-test ratio


Average collection period


Return on assets

Profit margin

Asset turnover

0.78:1

($746.4 $953.6)

0.60:1

[($302.4 + $267.7) $953.6]

12.95 times

[$3,171.3 (($267.7 + $221.9) 2)]

28.2 days

(365 12.95)

107.61%

($2,258.4 $2,098.6)

(6.86%)

[($137.6) (($2,098.6 + $1,911.2) 2)]

(4.3%)

(($137.6) $3,171.3)

1.58 times

($3,171.3 (($2,098.6 + $1,911.2) 2)]1.21:1

($60.5 $49.9)

1.12:1

[($50.7 + $5.2) $49.9]

39.15 times

[$203.6 (($5.2 + $5.2) 2)]

9.3 days

(365 39.15)

49.36%

($92.1 $186.6)

10.72%

($15.8 (($186.6 + $108.2) 2)]

7.8%

($15.8 $203.6)

1.38 times

($203.6 (($186.6 + $108.2) 2)]

(b) It appears that Company A is in financial trouble. Its current ratio is less than 1, indicating that it cannot meet its current obligations with its current assets. Its acid-test ratio is only 0.60:1. Company A has more debt than assetsits debt to total asset ratio is over 100%. Its return on assets is negative and its operating expenses are greater than revenue. The only ratio that it exceeds Company B on is its asset turnover ratio.

(a)Black and Decker appears to be more liquid. Even though its current ratio is lower than both Snap-On and the industry, Black and Decker has a higher receivables turnover and is also moving its inventory more quickly.

(b)By reviewing the debt to total assets we can see Snap-On has significantly less debt than Black and Decker and is more in line with the industry average. Snap-On also has a much better times interest earned which again indicates that it is the more solvent of the two companies.(c)Both companies appear to be very profitable. Snap-On has a higher gross margin than Black and Decker but Black and Decker has a higher profit margin, offers a better return on shareholders equity and earns a higher return on assets. Black and Decker also has higher earnings per share. All of this would indicate that Black and Decker is the more profitable company.

(d)Investors seem to favour Snap-On as it has the higher price-earnings ratio. This is not consistent with (c), as you would expect investors to favour the more profitable company. Investors must be anticipating better future profitability from Snap-On.

VIENNA CORPORATION



Per

QuestionCalculationSolution

Sales

$11,000,000$11,000,000

Cost of goods sold

(a)Step 3 $11,000,000 - $3,960,000 7,040,000

Gross profit

(b)Step 2 $11,000,000 x 36%3,960,000

Operating expenses

1,665,000 1,665,000


(c)Step 4 $3,960,000 - $1,665,0002,295,000

Interest expense(d)Step 7 $2,295,000 - $2,155,000 140,000


(e)Step 6 $1,595,000 + $560,000 2,155,000

Income tax expense

560,000 560,000

Net earnings

(f)Step 5 $11,000,000 x 14.5% $ 1,595,000

VIENNA CORPORATION

Balance Sheet

December 31, 2004

ASSETS

Current assets

Cash

$ 450,000Step 11 $2,630,000 $1,100,000

$880,000$ 650,000

Accounts receivable (net)

(g)Step 1 $11,000,000 101,100,000

Inventory

(h)Step 8 $7,040,000 8 880,000

Total current assets

(i)Step 10 $7,250,000 - $4,620,0002,630,000

Property, plant and equipment4,620,000 4,620,000

Total assets

(j)Step 9 $1,595,000 0.22$7,250,000

LIABILITIES

Current liabilities

(k)Step 14 $2,630,000 3$ 877,000


(l)Step 15 $3,850,000 - $877,000 2,973,000

Total liabilities

(m)Step 13 $7,250,000 - $3,400,000 3,850,000

SHAREHOLDERS' EQUITY

Common shares

3,000,0003,000,000

Retained earnings

400,000 400,000

Total shareholders' equity

3,400,000 3,400,000

Total liabilities and shareholders' equity

(n)Step 12 = Total assets$7,250,000

(a) Decrease total debt will now increase causing the ratio to decrease.

(b) Decrease interest expense will increase causing the ratio to decrease.

(c) Increase Assuming the shares are cancelled; the shareholders equity should decline causing the return to the remaining shareholders to increase.

(d) No effect on payout ratio as this ratio only considers cash dividends. No effect on return on common shareholders equity as there is no change in total common shareholders equity as a result of a stock dividend.

(e) Decrease Assuming the current ratio is greater than 1:1; the increase in payables will cause the current ratio to decrease. If the current ratio were less than 1:1, the increase in payables would cause the current ratio to increase.

(f) Increase the inventory turnover, as cost of goods sold will now be higher. The effect on the gross profit margin will depend on the selling price of the item compared to its cost.

(g) No effect as gross accounts receivables will remain the same.

(h) The average total assets will now be lower, causing return on assets to increase.

(a)Taste.com has greater liquidity than Refresh Corp. Its current ratio is higher than Refresh Corp.s and, indeed, higher than the industry. Within its current ratio, its acid-test ratio, receivables turnover, and inventory turnover are all greater than the industry. All of these ratios, with the exception of the receivables turnover, are also higher than Refresh Corp.s. The receivables turnover ratio, while not as high as Refresh Corp., is still a good ratio, with the collection period averaging 37 days (365/9.8).

(b)No, investors would not be overly concerned with either companys debt levels. Although Taste.com has a much higher debt position than does Refresh Corp., they have sufficient earnings (see times interest earned ratio) to cover their debt charges. Taste.coms times interest earned ratio, although lower than Refresh Corp.s, is still better than the industrys. Taste.com is, however, quite thin in terms of generating enough cash annually (see cash total debt coverage ratio) to repay its debt. Still, over time they may be okay. They should monitor their cash flow carefully, however, to ensure that they dont over stress their cash demands (e.g., from large capital expansion requirements).

(c)Refresh Corp. is generating a better gross profit margin than Taste.com (perhaps reducing its costs due to greater buying power). Refresh Corp. is also more profitable than Taste.com in its profit margin. This means that it is controlling all other expenses, in addition to cost of sales, much better than Taste.com. Its return on assets (profitability of assets) is also well done. Its asset turnover ratio is the same as Taste.coms, and it exceeds the industry average for all these profitability ratios. Investors also believe Refresh Corp. is more profitable, or has more future potential, than Taste.com since its P-E ratio far exceeds both Taste.com and the industry. The only profitability ratios for Refresh Corp. that are less than Taste.com and the industry average are the return on equity and EPS ratios. These could be influenced by the capital structure of each company. That is, Refresh Corp. could have more common shares issued, proportionately, than Taste.com.

PROBLEM 14-11 (Continued)

(d)Examples of factors you should be aware of when using ratio analysis are

Management may be unduly affecting the results through estimates.

Historical cost basis of accounting ignores inflation.

Differences in choice of GAAP may affect interpretation.

One company may be highly diversified, which may affect comparisons using consolidated data.

Qualitative factors ignored in traditional financial statements (e.g., goals, motivation, intellectual capital, etc.).

(Note: Students were only required to identify two factors.)

Policy ChoiceCurrent

ratio (1.5:1)Gross profit

margin (40%)Earnings per share($1.50)Debt to

total

assets (25%)Times

interest

earned (20x)Return

on total

assets

(10%)

(a)It is a period of deflation and the president would like to use the average inventory cost flow assumption instead of FIFO.

IIIDII

(b)The company is considering using straight-line amortization, which will produce a lower expense than other methods.

NENEIDII

(c)The company is leasing equipment and is setting up the lease as an operating lease. Its rent expense under an operating lease will be lower than interest expense and amortization expense under a capital lease.NENEIDII

NORTEL NETWORKS CORPORATION

(in U.S. millions)

(a)

$%$%

2002ChangeChange2001ChangeChange2000

Revenues $10,560 $ (6,951)(39.7)$17,511$(10,437)(37.3)$27,948

Cost of revenues 6,953 (7,214)(50.9)14,167(947)(6.3)15,114

Gross profit 3,607 2637.9 3,344(9,490)(73.9)12,834

Operating expenses 5,184 (22,169)(81.0)27,35317,918189.9 9,435

R&D expense 2,230 (1,009)(31.2)3,239(1,809)(35.8)5,048

Interest expense 256 (55)(17.7)31114284.0 169

Net loss from continuing operations before (4,063) 23,496 85.3 (27,559) (25,741) (1415.9) (1,818)

Income taxes

Income tax recovery (expense) 478 (2,774)(85.3) 3,252 4,429376.3 (1,177)

Net loss from continuing operations (3,585)20,72285.3(24,307)(21,312)(711.6) (2,995)

Net loss from discontinued operations - (2,995)(2,520)(530.5) (475)

Net earnings (loss) $ (3,585)$23,71786.9$(27,302)$(23,832)(686.8) $(3,470)

Loss per share$(0.93)$6.6987.8$(7.62)$(6.61)(654.5) $(1.01)

Market price per share$2.52 $(9.38)(78.8)$11.90$(36.35)(75.3)$48.25

Current assets of discontinued operations $ 223 $ (485)(68.5)$ 708$ (814)(53.5)$ 1,522

Total current assets 8,476 (3,286)(27.9)11,762(4,768)(28.8)16,530

Total assets 15,971 (5,166)(24.4)21,137(21,043)(49.9)42,180

Current liabilities 6,982 (2,475)(26.2)9,4573994.4 9,058

Total liabilities 14,011 (2,302)(14.1)16,3133,24224.8 13,071

Common shares 35,696 7212.1 34,9753,1409.9 31,835

Deficit 33,736 3,58511.9 30,15127,4251,006.1 2,726

(b)The primary drivers of the companys deterioration are declining revenues, increasing operating expenses in 2001 and higher debt as a proportion of total assets.

(c)Nortel has been financing its operations through issuing common shares.

(a)Condensed Statement of Earnings


Chen CorporationCouric Ltd.

DollarsPercentDollarsPercent

Net sales

Cost of goods sold

Gross profit

Operating expenses


Interest expense


Income tax expense

Net earnings$1,849,035

1,080,490 768,545

502,275 266,270

6,800 259,470

103,800$ 155,670100.0%

58.4%41.6%

27.2%14.4%

0.4%14.0%

5.6% 8.4%$539,038

338,006201,032

79,000122,032

1,252120,780

48,300$ 72,480100.0%

62.7%37.3%

14.7%22.6%

0.2%22.4%

9.0% 13.4%

(b)

Chen: Return on Assets

$155,670 $894,750 = 17.4%

$155,670 is Chens 2004 net earnings. $894,7501 is Chens 2004 average assets:

120042003

Current assets

Noncurrent assets

Total assets$325,975

651,115$977,090+$312,410

500,000$812,410=

PROBLEM 14-2B (Continued)

(b) (Continued)

Couric: Return on Assets

$72,480 $251,313 = 28.8%

$72,480 is Courics 2004 net earnings. $251,3132 is Courics 2004 average assets:

220042003

Current assets

Capital assets

Total assets$83,336

214,010$297,346+$79,467

125,812$205,279=

Chen: Return on Common Shareholders Equity

$155,670 $724,430 = 21.5%

$155,670 is Chens 2004 net earnings. $724,4303 is Chens 2004caverage shareholders equity:

320042003

Common shares

Retained earnings

Shareholders equity$500,000

302,265$802,265+$500,000

146,595$646,595=

Couric: Return on Common Shareholders Equity

$72,480 $191,238 = 37.9%

$72,480 is Courics 2004 net earnings. $191,2384 is Courics 2004 average shareholders equity:

420042003

Common shares

Retained earnings

Shareholders equity$120,000

112,478$232,478+$120,000

29,998$149,998=


(c)Chen Corporation appears to be more profitable. In terms of total dollars it has higher gross profit, earnings from operations, earnings before taxes, and net earnings. However, when looking at relative values we see that Couric has a higher return on assets and a higher return on shareholders equity. Chen is higher only in gross profit. Therefore, once size differences have been eliminated, Couric is clearly the more profitable of the two companies.

(a)Current ratio

= 1.71:1

(b)Acid-test ratio

= 1.04:1


= 17.37 times

(d)Average collection period 365 days 17.37 = 21 days


= 7.8 times

(f)Days in inventory 365 days 7.8 = 47 days


= 1.40 times

(h)Debt to total assets

= 28.23%

(i)Times interest earned

= 14.54 times

(j)Cash total debt coverage

= 0.84 times


(k)Gross profit margin

= 47.6%

(l)Profit margin

= 13.8%

(m)Return on assets

= 28.8%

(n)Asset turnover

= 2.08 times

(o)Return on common shareholders equity

= 45.1%

(p)Earnings per share

= $4.57

(a)20052004

1.Profit margin

= 4.7%= 3.7%

2.Gross profit margin

= 40.0%= 38.5%

3.Asset turnover

= 1.07 times

= 1.27 times

4.Earnings per share

= $0.94= $0.74

5.Price-earnings ratio

= 8.51 times = 6.76 times

6.Payout ratio

* = 9.1%

*$105,000 + $33,000 $x = $135,000; x = $3,000** = 8.3%

**$83,000 + $24,000 $x = $105,000; x = $2,000


(a) (Continued)

20042003


= 36.1%

* $90,000 + $170,000 = $260,000= 27.1%

**$75,000 + $85,000 = $160,000

8.Current

= 1.8:1

*$25,000 + $50,000 + $90,000= 2.0:1

** $20,000 + $45,000 + $85,000

(b)The underlying profitability of the corporation appears to have improved (see profit margin, gross profit margin, and earnings per share and P-E ratio). The corporations price-earnings ratio has increased, which suggests that investors may be looking more favourably at the corporation. However, the corporations debt to total assets and payout ratio have both increased which reduces the companys solvency. The companys liquidity position has deteriorated as evidenced by the decline in the current ratio.

(a)Liquidity20042003Change

Current = 1.8:1 = 1.9:1Deterioration

Acid-test = 0.8:1 = 1.1:1Deterioration

Receivables

turnover = 9.3 times = 9.1 timesImprovement

Inventory

turnover = 3.5 times = 4.8 timesDeterioration

An overall decrease in short-term liquidity has occurred. All measures with the exception of the collection of receivables have declined.


(a) (Continued)

Profitability

20042003Change

Gross profit$280,000 = 31.1%

$900,000$265,000 = 31.5%

$840,000Deterioration

Profit margin = 6.2% = 6.5%Deterioration

Asset turnover = 1.2 times


Return on assets

= 7.5%

= 8.6%Deterioration

Return on shareholders equity = 16.8% = 17.4%Deterioration

EPS = $2.80 = $2.75Improvement

Profitability has decreased slightly.


(a) (Continued)

Solvency20042003Change


= 59.1%

= 51.2%Deteriorated

Overall solvency has deteriorated.

(b)20052004

1.Return on common

shareholders equity

= 10.5%

= 16.8%


= 37%

= 59.1%

3.Price-earnings

= 6.0 times

= 3.6 times

(a) ($221,600* + $189,000** + $200,000 + $149,000) 2 = $379,800

**$200,000 + (1,800 X $12/share) = $221,600

**$149,000 + $40,000 = $189,000

(b) ($200,000 + $149,000 + $200,000 + $116,000) 2 = $332,500

(c) $45,000 + $40,000 + $250,000 = $335,000

(d) $170,000 + $45,000 + $40,000 + $250,000 = $505,000

(e) $40,000 20,000 = $2.00

(f) $56,000 20,000 = $2.80

(a)Ratio (Industry average)FUTURE SHOP LTD.INTERTAN, INC.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.Current (1.6:1)

Receivables turnover (23.7 times)

Average collection period (15 days)

Inventory turnover (5.5 times)

Days in inventory (66 days)

Cash current debt coverage (n/a)

Debt to total assets (n/a)

Cash total debt coverage (n/a)

Profit margin (2.1%)

Asset turnover (2.6 X)

Return on assets (5.2%)

Return on common shareholders equity (9.8%)

Gross profit margin (27.4%)

0.88:1

($241.7 $275.2)

147.1 times

($1,985.2 $13.5)

2.5 days

(365 147.1)

7.4 times

($1,534.4 $207.2)

49.3 days

(365 7.4)

0.13 ($34.9 $275.2*)

74.0% ($326.7 $441.6)

0.11 ($34.9 $326.7*)

1.6%

($32.4 $1,985.2)

4.9 times

($1,985.2 $405.4)

8.0% ($32.4 $405.4)

33.2%

($32.4 $97.6)

22.7%

($450.8 $1,985.2)3.0:1

($192.7 $64.1)

36.9 times

($468.8 $12.7)

9.9 days

(365 36.9)

2.6 times

($281.0 $106.2)

140.4 days

(365 2.6)

0.29 times

($18.8 $64.1*)

33.0% ($71.2 $215.5)

0.26 times ($18.8 $71.2*)

5.0%

($23.5 $468.8)

2.2 times

($468.8 $211.8)

11.1% ($23.5 $211.8)

17.9%

($23.5 $131.6)

40.1%

($187.8 $468.8)

*Average current and total liability figures were not included; ending current and total liability amounts were used instead.


(b)The comparison of the two companies shows the following:

LiquidityInterTAN has a much higher current ratio than both the industry and Future Shop. However, this is largely attributable to a large inventory balance (very high number of days in inventory). Future Shop appears to be the more liquid of the two when considering accounts receivable and inventory turnovers.

SolvencyIn terms of solvency, Future Shops debt to total assets ratio of 74.0% is above InterTANs at 33.0%. InterTAN also has more cash from operating activities available to pay its liabilities as evidenced by the companys higher cash total debt coverage ratio.

ProfitabilityWhile both companies are profitable, InterTANs profit margin, return on assets and gross profit margin are all higher than Future Shop and the industry average. Future Shop has a high return on shareholders equity, which is likely due to the financial leverage gained by using more debt financing.

(a)RatioCompany ACompany B

1. Current ratio

2. Acid-test ratio

3. Receivables turnover

4. Average collection period

5. Debt to total assets

6. Times interest earned

7. Return on assets

8. Asset turnover

2.18:1

($2,688.1 $1,230.9)

0.74:1

($910.4 $1,230.9)

8.25 times

[$7,075.0 (($718.7 + $169.7 + $645.0 + $181.9) 2)]

44 days

(365 8.25)

55.29%

($2,545.8 $4,604.1)

1.93 times

($187.2 $97.2)0.94%

[$39.7 (($4,604.1 + $3,880.2) 2)]

1.67 times

[$7,075 (($4,604.1 + $3,880.2) 2)]1.06:1

($884.4 $837.8)

0.08:1

($64.2 $837.8)

39.82 times

[$1,688.2 (($56.7 + $28.1) 2)]

9 days

(365 39.82)

87.94%

($953.9 $1,084.7)

(6.28) times

(($108.6) $17.3)

(24.45%)

[($333.6) (($1,084.7 + $1,644.3) 2)]

1.24 times

[$1,688.2 (($1,084.7 + $1,644.3) 2)]

(b)Based on the current ratio, acid-test ratio and debt to total assets ratio, Company Bs performance is far worse than Company A. Company B has had net losses for the last two years. Company A showed positive earnings on the current statement of earnings.

[Note to instructor: Company A is actually the Hudson's Bay Company and its results for January 31, 1999 and for January 31, 1998. Company B is actually The T. Eaton Company Limited and its results for January 31, 1998 and January 25, 1997.

(a)Wendys appears to be more liquid. Its current ratio, quick ratio and receivable turnover are all higher than McDonalds. Wendys current and quick ratios are also better than the industry average. McDonalds has a higher inventory turnover meaning the company is able to move inventory more quickly than Wendys. However, Wendys inventory turnover is still significantly better than the average company in the industry.

(b)By reviewing the debt to total asset we can see Wendys has significantly less debt than both McDonalds and the industry. Wendys also has a much better times interest earned which again indicates that it is the more solvent of the two companies.(c)Both companies appear to be very profitable. Wendys has a higher profit margin than McDonalds but McDonalds has a higher gross profit margin. Wendys also has a better return on shareholders equity, a higher return on assets and higher earnings per share. All of this would indicate that Wendys is the more profitable company.

(d)Investors seem to favour McDonalds as it has the higher price-earnings ratio; this is not consistent with (c), as you would expect investors to favour the more profitable company. Investors must anticipate that McDonalds will have better future profitability than Wendys.

SCHWENKE CORPORATION



Per QuestionCalculationSolution

Sales

(a)Step 1 $125,000 0.10 $1,250,000

Cost of goods sold

(b)Step 3 $1,250,000 - $500,000 750,000

Gross profit

(c)Step 2 $1,250,000 x 40% 500,000

Operating expenses

$287,500 287,500


(d)Step 4 $500,000 - $287,500212,500

Interest expense4,167 4,167


(e)Step 5 $212,500 - $4,167208,333

Income tax expense (36.3%)

(f)Step 6 $208,333 x 40% 83,333

Net earnings

$125,000$ 125,000

SCHWENKE CORPORATION

Balance Sheet

December 31, 2004

ASSETS

Current assets

Cash

$ 54,000$ 54,000

Accounts receivable (net)

(g)Step 12 ($140,000 x 1.1) - $54,000100,000

Inventory

(h)Step 13 $280,000 - $54,000 - $100,000 126,000

Total current assets

(i)Step 11 $140,000 x 2280,000

Property, plant and equipment (net)

(j)Step 14 $1,000,000 - $280,000 720,000

Total assets

(k)Step 7 $1,250,000 1.25$1,000,000

LIABILITIES

Current liabilities

(l)Step 10 $350,000 - $210,000$ 140,000


210,000 210,000

Total liabilities

(m)Step 9 $1,000,000 - $650,000 350,000

SHAREHOLDERS' EQUITY

Common shares

320,000320,000

Retained earnings

330,000 330,000

Total shareholders' equity

650,000 650,000

Total liabilities and shareholders' equity

(n)Step 8 (from Step 7)$1,000,000

(a)Increase/Decrease total debt will now increase causing the debt to total assets ratio to increase and the additional interest on the debt will cause the times interest earned ratio to decline.

(b)Decrease The additional shares capital will cause the return on common shareholders equity to decline.

(c) Increase The payment of dividends (assuming they are cash) will cause the payout ratio to increase.

(d) Decrease - The purchase of inventory will cause inventory and current liabilities to increase. This will cause the current ratio to deteriorate (provided that the current ratio is greater than 1:1) and the inventory turnover ratio to decline.

(e) Decrease - The sale of the inventory on credit will cause accounts receivable to increase, which will improve the acid test ratio. The effect on the gross profit margin will depend on the selling price of the inventory compared to its cost.

(f) No effect - The increase in the allowance for doubtful accounts does not affect this ratio as it is calculated using gross, not net receivables.

(g) No effect/Increase Current assets will remain the same as net receivables are unchanged due to the write-off. The write off will cause gross accounts receivable to decline, which will improve the accounts receivable turnover.

(h) Total assets will now be higher which will cause the return on assets to decrease.

(a)Current ratio

Favourable

Collection period

Unfavourable

Inventory turnover

Favourable

Return on shareholders' equity Favourable


Favourable

Times interest earnedFavourable

(b)Nextecs collection period is higher than the industry average. Even though it has improved some since 2003, Nextec must review its credit policies and place more effort on collecting receivables.

(c)Do not lend money

Borrowing $1,000,000 will cause Nextecs debt to total assets ratio to increase to 73% [($1,000,000 + $294,200) ($1,000,000 + $773,000)]well above the industry average.

The increase in interest burden increases risk of loss to the company if it experiences a downturn.

The collection period is too long compared to the industry. Therefore, the risk of exposure to bad debts is greater than it should be.

(d)They must increase their equity position before the bank will lend them money. This can be done by:

Issuing more shares

Raising venture capital

Accessing government assistance programs

(e)Two other factors to consider:

Strength of management team

Marketability of product

Alternative responses are also acceptable. They may include:

Future cash flows expected

Is there a proper business plan in place

Policy ChoiceCurrent

ratio

(1.5:1)Gross profit

margin

(40%)Earnings per share

(1.50)Debt to

total

assets

(25%)Times

interest

earned

(20x)Return

on assets (10%)

(a)It is a period of inflation and the president would like to use the FIFO inventory cost flow assumption instead of average cost.I

(During times of inflation, FIFO will produce the highest inventory value; lowest cost of goods sold expense, and highest net earnings.)

I

I

D

I

I

(Net earnings will increase as will total assets)

(b)The company is considering using double-declining balance amortization which will produce a higher expense than other methods.

NE

NE

D

I

(Total assets will decrease.)

D

D

(Net earnings will decrease as will total assets.)

(c)The company will be leasing automobiles and is setting up the lease as a capital lease. Its interest expense and amortization expense under the capital lease will be higher this year than would be rent expense under an operating lease.

D

(A portion of the liability for the capital lease will be classified as a current liability.)

NE

D

I

D

D

BYP 14-1 FINANCIAL REPORTING PROBLEM

(a)LOBLAW COMPANIES LIMITED

Horizontal Trend Analysis

2002 ($ in millions)

$%

2002ChangeChange2001

Sales$23,082 $1,596 7.4 $21,486

Operating expenses 21,779 1,429 7.0 20,350

Interest expense 161 3 1.9 158

Income tax 414 42 11.3 372

Net earnings (loss)$ 728 $ 165 29.3 $ 563

Current assets$ 3,526 $ 440 14.3 $ 3,086

Total assets 11,110 1,085 10.8 10,025

Current liabilities 3,154 358 12.8 2,796

Total liabilities 6,986 530 8.2 6,456

Share capital 1,195 1 0.1 1,194

Retained earnings 2,929 554 23.3 2,375

There have been no significant changes in Loblaws results during 2002. Sales and expenses both increased by around 7%. Current assets increased at a faster rate than current liabilities, which indicates the company is more liquid.

BYP 14-1 (Continued)

(b)($ in millions)

2002Debt to total assetsTimes interest earnedCash total debt

coverage

63%

($6,986 $11,110)$1,303 $161

= 8.1 times

$981

($6,986 + $6,456) 2

= 0.15 times

Loblaws long-term solvency is not in jeopardy. Even with a high debt to total assets indicating that creditors are providing 63% of Loblaws total assets, Loblaw has the ability to pay interest payments when they come due as indicated by the times interest earned ratio of 8.1 times.

(c)($ in millions)

Profit margin$728 $23,082 = 3.2%

Asset turnover$23,082 [($11,110 + $10,025) 2] = 2.2 times

Return on assets$728 [($11,110 + $10,025) 2] = 6.9%

Return on common shareholders equity

$728 [($4,124 + $3,569) 2] = 18.9%

Loblaw is a profitable corporation. Shareholders are earning 18.9% on their investment. Considering that Loblaw is primarily in a high-volume business where the margin above costs is historically low, the profit margin is acceptable.

(d)Substantial amounts of important information about a company are not in its financial statements. Events involving such things as industry changes, management changes, competitors actions, technological developments, governmental actions, and union activities are often critical to the successful operation of a company. Financial reports in the media and publications of financial service firms (Standard & Poors, Dun & Bradstreet) will provide sufficient relevant information not usually found in the annual report.BYP 14-2 COMPARATIVE ANALYSIS PROBLEM

(a)($ in millions)LoblawSobeys

1.Percentage increase in sales

= 7.4%

= 7.0%

Percentage increase in net earnings

= 29.3%

= (15.0%)

2.Percentage increase in total assets

= 10.8%

= 11.0%

Percentage increase in total shareholders equity

= 15.6%

= 12.0%

3.Earnings per share*2002: $2.64

2001: $2.042003: $2.72

2002: $1.76

*Given on statement of earnings

(b)Both companies had significant increase in sales. Loblaw also had a corresponding increase in earnings, while Sobeys experienced a slight decline in 2003. However, the entire decline in earnings was due to the loss on the discontinued operations. Sobeys earnings from continuing operations actually increased in 2003. In terms of total assets and shareholders equity, both Sobeys and Loblaw experienced healthy increases during the most recent fiscal year.

BYP 14-3 RESEARCH CASE

(a)As an investor you would be better informed of the magnitude of the attacks by using financial statements prepared in Canada since Canadian standard setters plan to allow the effects of September 11 to be treated as an extraordinary item and disclosed separately on the financial statements. American standard setters believe such treatment would be misleading and therefore have recommended that the effects of September 11 be included as regular business activities.

(b)Air Canada might report the multi-million-dollar aid package as revenue or as a reduction in any extraordinary loss reported as a result of the September 11 attacks.

(c)

Air Canada might report losses due to severe weather as unusual. The frequency of bad weather in Canada would not allow the company to classify such losses as extraordinary.

(d)Quebecor has provided extra disclosure by showing separately the effects of all nonrecurring activities. For example the company has presented separately, before tax, the effect of items such as a reserve for restructuring and gains on dilution from the issuance of capital stock by subsidiaries. These provide users with additional information to allow them to make more informed decisions concerning the future profitability of the business.

BYP 14-4 INTERPRETING FINANCIAL STATEMENTS

(a)Liquidity RatiosCoca-ColaPepsiCo

1.Current ratio1.0:1

($7,352 $7,341)1.06:1

($6,413 $6,052)

2.Acid-test ratio0.61:1

($4,442 $7,341)0.72:1

($4,376 $6,052)

3.Receivables turnover9.83 times

($19,564 $1,990)10.75 times

($25,112 $2,337)

4.Average collection period37.1 days

(365 9.83)34.0 days

(365 10.75)

5.Inventory turnover6.0 times

($7,105 $1,175)8.7 times

($11,497 $1,326)

6.Days in inventory60.8 days

(365 6.0)42.0 days

(365 8.7)

7.Cash current debt coverage ratio0.60

($4,742 $7,885)0.84

($4,627 $5,525)

PepsiCo is slightly more liquid than Coca-Cola as it is higher in all of the liquidity ratios prepared above.


(b)Solvency RatiosCoca-ColaPepsiCo

1.Debt to total assets = 51.8% = 60.4%

2.Times interest earned

= 24.0 times

= 28.3 times

3.Cash total debt coverage

= 0.40 times

= 0.34 times

Coca-Cola has a lower debt to total assets ratio than PepsiCo and its cash total debt coverage is higher than PepsiCos. However, both companies appear to have sufficient earnings to repay all debts as evidenced by the high times interest earned ratios. Overall, Coca-Cola is slightly more solvent than PepsiCo.

(c)Profitability RatiosCoca-ColaPepsiCo

1.Profit margin15.6%

($3,050 $19,564)13.2%

($3,313 $25,112)

2.Gross profit margin63.7%

($12,459 $19,564)54.2%

($13,615 $25,112)

3.Asset turnover0.83 times

($19,564 $23,459)1.11 times

($25,112 $22,585)

4.Return on assets13.0%

($3,050 $23,459)14.7%

($3,313 $22,585)

5.Return on common shareholders equity26.3%

($3,050 $11,583)36.9%

($3,313 $8,973)

The Coca-Cola Company is more profitable than PepsiCo, Inc. It is better in terms of profit margin and gross profit. However, PepsiCo is turning over its assets better and providing a better return on assets and shareholders equity. BYP 14-5 A GLOBAL FOCUS

(a)Ratio

(Industry Average)CN

($ in millions CND)BNSF

($ in millions US)

1.Current ratio (0.7:1) = 0.54:1 = 0.38:1

2.Acid-test ratio (0.4:1) = 0.35:1 = 0.08:1

3.Cash current debt

coverage (n/a)

= 0.62 times

= 0.99 times

4.Receivables

turnover (13x)

= 8.9 times

= 57.4 times

In terms of liquidity, both companies have relatively low current ratios relative to the industry. BNSFs and CNs current ratio are similar, but their acid-test ratios differ. CN has better immediate liquidity than BNSF, however, much of this is due to the fact that BNSF collects its receivables significantly quicker than CN and the industry.


(b)Ratio


($ in millions)BNSF

(US$ in millions)

1.Debt to total assets (46.8%) = 65% = 69%

2.Times interest

earned (3.3x)

= 3.4 times

= 3.8 times

3.Cash total debt coverage (n/a)

= 0.09 times

= 0.12 times

4.Free cash flow (n/a)$1,173 - $571 - $179

= $423$2,106 - $1,358 - $183

= $565

The comparison here is mixed. The debt to total assets ratio showsthat BNSF relies more heavily on debt, suggesting it is less solvent. BNSF has a higher times interest earned ratio, suggesting that, even though it relies on a significant amount of debt financing, it has a better ability to service its debt. Finally, the cash total debt coverage ratio and free cash flow continue to support our assertion that BNSF is more solvent.

Both companies appear well able to support their capital expenditure growth as they both have positive free cash flow.


(c)Ratio


($ in millions)BNSF

(US$ in millions)

1.Asset turnover (0.4x)

= 0.32 times

= 0.36 times

2.Profit margin (8.1%) = 9.3% = 8.5%

3.Return on assets (2.9%)

= 3.0%

= 3.0%

4.Return on common

shareholders equity (8.8%)

= 9%

= 9.6%

The companies are similar in their ability to generate sales from their assets, as evidenced by their asset turnover. This is also consistent with the industry average. However, CN reports a slightly higher profit margin. Overall both companies are performing well when compared to the industry.


(d)We have done this comparison without giving consideration to the fact that these two companies prepare their financial statements using the accounting principles of different countries. If there are significant differences in these principles, then the ratios may differ even though the underlying economics are the same.

In addition to differences in accounting practices, other non-accounting issues need to be considered. For example, if bankruptcy laws differ across the two countries, it may make reliance on debt more or less desirable in one country than the other. Also, the railroad industry may be a protected industry in one country but not the other, enjoying subsidies or an implied guarantee that it wont be allowed to fail. This would have implications for analysis of the companys future. Or, railroads may be a regulated industry in one of the countries, thus being allowed to earn only a prescribed level of profit and being allowed to increase its fares only when the government says it can. The bottom line is, to evaluate a company, one must know the industry well, and to compare across countries, one must additionally know the factors that affect that industry that are unique to each country.

BYP 14-6 FINANCIAL ANALYSIS ON THE WEB

Due to the frequency of change with regard to information available on the World Wide Web, the Accounting on the Web cases are updated as required. Their suggested solutions are also updated whenever necessary, and can be found online in the Instructor Resources section of our home page .

BYP 14-7 COLLABORATIVE LEARNING ACTIVITY

(a)Lenders prefer that financial statements are audited because an audit gives independent assurance that the financial statements give a reasonable representation of the companys financial position and results of operations. With this independent assurance we feel more comfortable making a decision.

(b)The current ratio increase is a favourable indication as to liquidity, but tells little on its own about the going concern prospects of the client. From this ratio change alone, it is impossible to know the amount and direction of the changes in individual accounts, total current assets, and total current liabilities. Also unknown are the reasons for the changes.

The acid-test ratio is an unfavourable indication as to liquidity, especially when the current ratio increase is also considered. This decline is also unfavourable to the going concern prospects of the client because it reflects a declining cash position and raises questions as to reasons for the increases in other current assets, such as inventories.

The change in asset turnover cannot alone tell anything about either profitability or going-concern prospects. There is no way to know the amount and the direction of the changes in the two items. An increase in sales would be favourable for going concern prospects, while a decrease in assets could represent a number of possible scenarios and would need to be investigated further.

The increase in net earnings is a favourable indicator for both solvency and going concern prospects although much depends on the quality of receivables generated from sales and how quickly they can be converted into cash. One possibility here may be that despite a decline in sales the clients management has been able to reduce costs to produce this increase. Indirectly, the improved earnings may have a favourable impact on solvency and going concern potential by enabling the client to borrow currently to meet cash requirements.

The 32% increase in earnings per common share, which is identical to the percentage increase in net earnings, is an indication there has probably been no change in the number common shares outstanding.

This in turn indicates that financing was not obtained through the issue of common shares. It is not possible to reach conclusions about solvency and going concern prospects without additional information about the nature and extent of financing.


(b) (Continued)

The collective implications of these data alone are that the client entity is about as solvent and as viable as a going concern at the end of the current year as it was at the beginning, although there may be a need for short-term operating cash.

Although a quick evaluation of a reporting entity can be made using only a few ratios and comparing these with past ratios and industry statistics, the creditors should realize the limitations of such analysis even from the best prepared statements carrying an unqualified opinion.

A limitation on comparisons with industry statistics or other companies within the industry exists because material differences can be created through the use of alternative (but acceptable) accounting methods. Further, when evaluating changes in ratios or percentages, the evaluation should be directed to the nature of the item being evaluated because very small differences in ratios or percentages can represent significant changes in dollar amounts or trends.

The creditors should evaluate conclusions drawn from ratio analysis in light of the current status of, and expected changes in, such things as general economic conditions, the clients competitive position, the publics demand (for the product itself, increased quality of the product, control of noise and pollution, etc.), and the clients specific plans.

(c)1.Cash current debt coverageindicates liquidity

(short-term debt paying ability).

2.Debt to total assetsindicates solvency (percentage of assets financed by creditors).

3.Times interest earnedindicates solvency (ability to repay interest when due.)

Other answers are possible.

(d)The usefulness of analytical tools is limited by the use of estimates, the cost basis, the application of alternative accounting methods, atypical data at year-end, and the diversification of companies.

BYP 14-8 COMMUNICATION ACTIVITY

Memorandum

To: Self

Re: Earnings Quality at Shifty.com

In evaluating the financial performance of an entity it is important to understand the quality of the firms earnings, that is, does the information provide a full and complete picture of the companys performance.

To assess the quality of earnings, we should inquire of the audit committee some of the following questions:

1.What accounting policies are being used? Have any of these policies changed during the year?

2.What estimates have been used in preparing the financial statements? How reliable are these estimates?

3.Have pro forma numbers been presented? How have these numbers been calculated?

4.Has management been pressured to increase earnings? Are there any bonus plans or stock option plans, which would lead management to manipulate earnings?

BYP 14-9 ETHICS CASE

(a)The stakeholders in this case are:

Vern Fairly, president of Fairly Industries

Anne Saint-Onge, public relations director

You, as controller of Fairly Industries

Shareholders of Fairly Industries

Potential investors in Fairly Industries

Any readers of the press release

(b)The presidents press release is deceptive and incomplete and to that extent his action is unethical.

(c)As controller you should at least inform Anne Saint-Onge, the public relationsdirector, about the biased content of the release. She should be aware that the information she is about to release, while factually accurate, is deceptive and incomplete. Both the controller and the public relations director (if she agrees) have the responsibility to inform the president of the bias of the about-to-be-released information.Legal Notice

Copyright

Copyright 2004 by John Wiley & Sons Canada, Ltd. or related companies. All rights reserved.

The data contained in these files are protected by copyright. This manual is furnished under licence and may be used only in accordance with the terms of such licence.

The material provided herein may not be downloaded, reproduced, stored in a retrieval system, modified, made available on a network, used to create derivative works, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise without the prior written permission of John Wiley & Sons Canada, Ltd.

PROBLEM 14-10A

EMBED Equation.3

EMBED Equation.3

PROBLEM 14-3A

PROBLEM 14-4A

PROBLEM 14-6A

PROBLEM 14-7A

PROBLEM 14-8A

PROBLEM 14-9A

PROBLEM 14-11A

PROBLEM 14-12A

PROBLEM 14-5A

PROBLEM 14-1B

PROBLEM 14-2B

PROBLEM 14-3B

PROBLEM 14-5B

PROBLEM 14-6B

PROBLEM 14-7B

PROBLEM 14-8B

PROBLEM 14-9B

PROBLEM 14-11B

PROBLEM 14-12B

PROBLEM 14-4B

PROBLEM 14-10B

Solutions Manual14-1Chapter 14

Copyright 2004 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.

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_11265084

2100 solutions - ch14

Documents

acalculate ratios

bcalculate ratios

selected ratios

aanalyse ratios

banalyse ratios

statement of earnings

comparative analysis

bprepare horizontal