A summary of selected historical results is presented below for
A summary of selected historical results is presented below for three Canadian companies: The Jean Coutu Group, Metro Inc., and Shoppers Drug Mart Corporation, which was acquired by Loblaw Companies Limited in 2013. Each of these companies has grown in size over time by acquiring assets and investing in other companies. (Amounts are in millions of dollars.)
1. Compute the net profit margin ratio and the return on equity for each company for each of the years 2010– 2012 using the table below:
2. Based on the computed ratios, rank these companies from most successful to least successful in generating net earnings for shareholders.
3. Assume that you are interested in investing in one of these three companies. Which company would you choose? Write a brief report to justify your choice.
4. Analysts examine both net earnings and cash flow from operating activities in evaluating a company. One measure that relates these two numbers is the quality of earnings ratio, which equals cash flow from operations divided by net earnings. The higher the ratio, the higher the quality of earnings. Compute this ratio for 2010– 2012, and rank the three companies from highest to lowest, based on the quality of their earnings.
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