Danier Leather Inc. is one of the largest publicly traded specialty leather apparel retailers in the world. It designs, manufactures, and sells high- quality fashionable leather clothing and accessories to customers. Its products are sold in stores at shopping malls, through its corporate sales division, and online through its website, www. danier. com . Since entering the retail business in 1974, the company has produced a strong, long- term track record of growth and earnings from continuing operations. Danier€™s financial statements for 2011 and 2012 are shown on the next few pages.
Required:
1. Examine Danier€™s statements of financial position. Identify the four largest changes in the carrying amount of assets, liabilities, and shareholders€™ equity between the statement of financial position dates. What type of transactions could have caused the changes in the carrying amounts 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, which are available on the company€™s website (www. danier. com), 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?
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. Danier€™s total assets and shareholders€™ equity at June 24, 2010, amounted to $ 73,581 and $ 54,265, respectively.
5. Suppose that you are evaluating Danier€™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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Danier Leather Inc. Consolidated Statements of Financial Position (thousands of dollars) June 30, 2012 June 25, 2011 Assets Current Assets Cash and cash equivalents (Note 4) Accounts reoeivable Income taxes recoverable Inventories (Note 5) Prepaid expenses $34.332 517 426 24.891 799 60,965 $28,698 385 28,964 901 58,948 Non-current Assets Property and equipment (Note 6) Computer software (Note7) Deferred income tax asset (Note 13) 15,012 726 1.909 $78,612 14404 1,054 $76,084 Liabilities Current Liabilities Payables and accruals (Note 9) Deferred revenue Sales return provision (Note 10) Inoome tax payable $10,161 1.463 124 $11,024 1489 47 278 12,838 11,748 Non-current liabilises 1.318 14.156 Deferred lease inducements and rent liabilitv 1373 Shareholders' Equity Share capital (Note 11) Contributed surplus Retained eamings 15,040 925 49,526 65.491 $78,612 15,160 934 45,834 61,928 $76,084 See accompanying notes to the consodated inancial statements. Danier Leather Inc. Consolidated Statements of Earnings and Comprehensive Earnings thousands of dollars, except per share amounts) For the Years Ended June 30, 2012 June 25, 2011 Revenue Cost of sales (Note 12) Gross profit $148,219 71.513 76,706 1,357 (229) 51 5.527 1,524 S 4,003 $157,621 71,352 86,269 75,618 (160) 103 10,708 3,140 S 7,568 Selling, general, and administrative expenses (Note 12) Interest income Interest expense Earnings before income taxes Provision for income taxes Note 13)n Net eamings and comprehensive eamings Net eamings per share Basic Diluted $ 0.86 $ 0.83 $ 162 $ 1.55 Weighted average number of shares outstanding: Basic Diluted 4.638,829 4,794,355 4,646,902 4,673,944 4.889,053 4,678,135 Number of shares outstanding at period end See accompanying notes to the consolidated financial statements