Refer to the financial statements of Canadian Tire Corporation (Appendix A) and RONA Inc. (on Connect) and the Industry Ratio Report (Appendix B on Connect).
1. Compute the gross profit percentage for both companies for the current year and the previous year. What do the changes in the ratios suggest?
2. Compute the receivables turnover ratio for both companies for fiscal years 2011 and 2012. Canadian Tire had $ 4,725 in trade receivables (net) at December 31, 2009, and RONA had $ 299.9 in trade receivables (net) at the same date. What accounts for the change in these ratios?
3. Compare the receivables turnover ratio of each company for 2012 to the industry average. Are these two companies doing better or worse than the industry average? Explain.