Kinross Gold Corporation is a Canadian company headquartered in Toronto. It explores and develops gold properties in the United States, Canada, Brazil, Chile, and Russia. Rani, a Business Administration student, has recently inherited some money from a grandparent. She intends to create a diversified portfolio of share investments. She has heard that, although they can be risky, investments in gold properties can also be quite profitable. Rani is contemplating investing in Kinross Gold Corporation. She has the annual report, which includes the financial statements (see Exhibit 7-18). She is concerned because the company showed a profit in 2009 but had a significant loss in 2008. More shares were issued in 2009 and if other investors are willing to buy new shares, they obviously have confidence in this company.
Required:
a. Knowing that Kinross explores and develops gold properties, explain the significance of gold inventory on its balance sheet by calculating a current ratio for each year and explaining the impact that inventory has on this ratio.
b. Review the financial statements and draw up a list of questions you think Rani should ask an investment advisor about this company.