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.
Required:
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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LEON'S FURNITURE INC. Consolidated Statements of Financial Position As at December 31 (tho usands of dollars) 2012 2011 Cash and cash equivalents (Notes 5 and 7) Available-for-sale finandal assets (Notes 5 and 18(e)) Trade receivables (Note 5) Income txes recoverable Inventories (Note 4) Deferred financing costs (Note 21) Total current assets Other assets 74,949 146,735 30,245 3,644 86,057 1,317 342,947 1,273 218,146 8,315 3,101 11,282 528 72,505 149,318 28,937 5,182 87,830 343,772 1,431 214,158 8,366 3,958 11,282 1,444 Property, plant, and equipment, net Note 8) Investment properties (Note 9) Intangible assets, net (Note 10) Goodwill (Note 10) Deterred income tax assets (Note 16) LIABILITIES AND SHAREHOLDERS' EQUITY $ 86,357 19,157 17.457 Trade and other payables (Notes 5 and 11) Customers' deposits Diidends payable (Note 13) Deferred warranty plan revenue Total current liabilities Deferred watranty plan revenue Redeemable share liability (Notes 5 and 12) Total liabilities Commitments and contingencies (Note 18) Shareholders' equity Common shares (Note 13) Accumulated other comprehensive income (loss) Retained eamings Total shareholders' equity $ 73,542 7,055 139.1 17,251 19,445 158,960 20,918 404,647 584411 26,693 2.396 452,187 The accompanying notes are an integral part of these consoidated financial statements LEON'S FURNITURE INC Consolidated Statements of Income Years Ended December 31 (thousands of dollars) Revenue (Note 14) Cost of sales Gross profit 2012 682,163 398,704 283,459 2011 682,836 394,099 288,737 Operating expenses (Note 15) General and administrativwe Sales and marketing Occupancy Other 99,346 83,479 34.289 96,038 78,387 32,731 6,239 213.395 75,342 3,506 78,848 22,182 46782 56.666 223,126 60,333 3,350 63,683 16,901 Operating profit Finance income Profit before inoome taxes Income taxexpense (Note 16) Profit for the year attributable to the shareholders of the company Weighted average number of common shares outstanding Basic Diluted 70,032,721 72.317,598 69,969.417 72,305,424 Earnings per share (Note 17) Basic Diluted $ 0.67 0.81 $ 0.65 0.78 The accompanying notes are an integral part of these consolidated financial stateme nts