Refer to the consolidated balance sheets and statements of income and retained earnings for Leon's Furniture Limited, which are presented in Exhibit 6-13. (Leon's sells furniture, appliances, and electronics through its approximately 64 home furnishing stores located across Canada.)
In Exhibit 6-13
CONSOLIDATED BALANCE SHEETS

Required:
a. Notice that the first two current assets listed on the balance sheets are cash and cash equivalents and marketable securities. Why would these short-term investments in marketable securities not be treated as cash equivalents? Is it possible that there are other short-term investments included in cash and cash equivalents? If so, what can you infer about them?
b. Calculate the following ratios for both 2009 and 2008:
i. Current ratio
ii. Quick ratio
iii. Accounts receivable turnover ratio. Use the balance of accounts receivable at each year end, rather than average balances, for this calculation.
c. Comment on the ratio results and any significant trends.

Transcribed Image Text:

As at December 31 in thousands) 2009 2008 Current Cash and cash equivalents Marketable securities Restricted marketable securities (NOTE BID Accounts receivable Income taxes recoverable Inventory Future tax assets (NOTE Total current assets Prepaid expenses Goodwill INCTE 13 Intangible assets, net (NDTES 6AND 13 Other receivables Future tax assets iNOTE Property, plant and equipment, net (NOTE 5a 58,301 94,337 18,088 31,501 39,483 83,194 16,598 30,291 2,037 92,904 270 S 264.777 1,490 11,282 5,401 419 10,752 219,287 S 513,408 83,957 1,133 s 287,317 1,560 11,282 5,334 11,465 212,198 S 529,156 Liabilities and Shareholders' Equity Current Accounts payable and accrued liabilities Income taxes payable Customers' deposits Dividends payable Deferred warranty plan revenue Total current liabilities Deferred warranty plan revenuse Redeemable share liability:NOTE 10) Future tax liabilities (NOTE 7) Total liabilities Shareholders' equity Common shares NOTE T Retained earnings Accumulated other comprehensive loss INOTE 125 Total shareholders' equity 83,880 1,958 15,632 4,938 16,150 S 122,558 22,248 383 $ 95,247 14,119 4,952 15,267 S 129,585 21,712 285 8,468 S 160,050 154,018 17,704 357,576 (142) S 375,138 S 529,156 16,493 338,960 2,095) $ 353,358 S 513,408