In the All About You feature, you learned that there are on-line investment services that provide advice

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In the “All About You” feature, you learned that there are on-line investment services that provide advice to investors. These services offer stock quotes, company research reports, personal finance information, news, online seminars, and message boards. However, it is also important that as an investor you differentiate good information from bad information. Reading the financial statements and preparing a ratio analysis is one step in evaluating an investment. You have recently inherited $10,000 cash and you are considering investing in Canadian Tire Corporation, Limited’s shares.

Instructions
Go to Canadian Tire’s website at http://corp.canadiantire.ca and click on “Investors”, Then click on “Annual Reports”, and go to the 2012 annual report.
(a) Included in the annual report is Management’s Discussion and Analysis (MD&A), which provides highlights of the company’s operations, explanations for changes in the company’s financial position and strategic plans for the future. How might the MD&A provide useful information in your evaluation of the financial statement ratios?
(b) Calculate the following ratios for the 2012 fiscal year. Compare these to the 2011 ratios shown in the Ratio Analysis section of the chapter for Canadian Tire and reproduced in parentheses after each ratio below. For each ratio, has it improved or deteriorated from 2011?

(c) On the “Investors” section of Canadian Tire’s website, click on “Shareholders” and then click “Historical Price Lookup.” What were Canadian Tire’s shares trading at on the following dates?

1. December 30, 2011
2. December 28, 2012

(d) Under “Shareholders” click on “Stock Chart” and input “5 years” into the time range. Comment on the changes in the price of Canadian Tire’s shares over the five years.
(e) Based on your brief analysis of Canadian Tire’s ratios and share prices, do you think buying Canadian Tire’s shares is a good investment for you? Explain.
(f) If you are investing in the stock market, will you rely solely on your analysis of the financial statements? The history of Canadian Tire’s stock price? Or do you think you might rely on both your financial statement analysis and the history of the stock price? Explain.
(g) In the “All About You” feature, we learned that critics of message boards on investment services’ sites say that message boards can intensify the rumour mill. Do you think that you should ignore message boards when making investment decisions? Explain.

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Related Book For  answer-question

Accounting Principles Part 3

ISBN: 978-1118306802

6th Canadian edition Volume 1

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow

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