Leon s Furniture Limited is a leading Canadian full line furniture
Leon’s Furniture Limited is a leading Canadian full- line furniture retailer. The company sells home furnishings, major appliances, and home electronics through more than 75 company- owned and franchised stores across Canada. Its sales grew from $ 289 million when it became a public company in 1996 to $ 682 million in 2012. Leon’s financial statements for 2011 and 2012 are shown on the next few pages.
1. Examine Leon’s statements of financial position. Identify the four largest changes in the carrying amount of assets, liabilities, and shareholders’ equity between the statements of financial position dates. What type of transactions could have caused the changes in the carrying amount of these items?
2. The carrying amounts of the assets and liabilities reported on the company’s statements of financial position reflect a mix of historical acquisition costs, amortized costs, and fair values. Refer to the notes to the company’s financial statements for fiscal year 2012 that are available on its website (www. leons. ca/ investorrelations. aspx) and identify the valuation bases used by the company for financial reporting purposes.
3. Using information from the company’s statements of financial position and statement of earnings for 2012, can you determine the amount of cash flow generated from operations? If not, where can you find such information? The company’s notes to its financial statements indicate that depreciation of property, plant, and equipment and for investment properties for 2012 is $ 14,020 and that amortization of intangible assets totalled $ 866.
4. Compute the following ratios for fiscal years 2011 and 2012: total asset turnover ratio, return on assets, return on equity, and net profit margin ratio. Use the results of your computations to comment on the company’s financial situation and profitability of its operations in both years. Leon’s total assets and shareholders’ equity at December 31, 2010, amounted to $ 566,674 and $ 410,286, respectively.
5. Suppose that you are evaluating Leon’s financial statements for a potential investment in the company’s shares. To what extent is the information contained in these financial statements relevant for your decision? What additional information would you require before making your decision?
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