Summative Activity

Annual Report Analysis Introduction

For this assignment you will analyze the 2022 and 2021 annual reports of Canadian Tire Corporation. The site at which you may find the annual reports is: Canadian Tire Corporation Once you are on this site, use theFinancial Reporting menuto locate theAnnual Disclosures for 2022 and 2021. Your final report should be presented in a word processing document with accompanying spreadsheets. It should include a title page and be presented in a neat and organized manner.

Part 1 - Background Information - Use the 2022 annual report (Report to Shareholders) to answer the following:

You may also do further research on the Internet to find information. Remember when searching through the Reports, you may use the keyword search (find) function to more easily locate information. To do , press f and then type in the key word(s) you are searching for.

1. Describe the company including:

-the name of its CEO/president

-the address of the head office of the corporation

-the area(s) of business activity(3 areas - this may be found in the Company & Industry Overview)

- list 4 retail business owned by Canadian Tire Corporation

-the number of stores and gas outlets

-its TSX ticker symbol

-the length of time it has been in existence

2. Who are the auditors? What did they conclude regarding the fairness of the reporting of the financial position of the company (Independent Auditor's Report)?

3. What are the company's major sources of revenue (Historical Performance Highlights)?

4. What valuation method was used for the corporation's inventories (p. 94)

5. What depreciation method and estimated useful lives did the company use for Property and Equipment? (p. 94)

6. Describe, in detail, the share capital of this corporation in 2022 (p.126).

7. Did the company have a successful year according to the CEO (Greg Hicks)? Explain.

8. Describe the "outlook" of the company as outlined by the CEO?

Part 2 - Ratio & Trend Analysis

Ratio Analysis: Calculate the following ratios, for 2021 and 2022, from the data provided in the annual reports. Use a spreadsheet to do your calculations and display your answers.

** A Spreadsheet template for your answers has been provided in the instructions displayed in the Content of the course **

Key pages in which to find the required amounts for the various formulas are:

• Balance Sheet related #'s may be found on the Consolidated Balance Sheet pages (2022 - p. 80, 2021 - p. 75)

• Income related #'s may be found on the Consolidated Statement of Income pages (2022 - p. 81, 2021 - p. 76)

a) Current Ratio

• Current Ratio = Current Assets/Current Liabilities (required amounts will be found on the Consolidated Balance Sheet pages)

b) Profit Margin

• Net Income/Net Revenue (required amounts will be found on the Consolidated Statement of Income pages)

c) Return on Assets

• Net Income/Ave. Total Assets (amounts from the Consolidated Balance Sheets and Statements of Income will be needed for this calculation) ** to get an average total assets amount you must add the total assets at the beginning and end of the period together and then divide by 2

d) Return on Equity

• Return on Equity = Net Income/Ave. Shareholders Equity (amounts from the Consolidated Balance Sheet and Statements of Income will be needed for this calculation) ** to get an average Shareholders Equity amount you must add the total shareholders equity at the beginning and end of the period together and then divide by 2

e) Earnings per Share (Basic)

• Take theNet Income attributable to shareholders of Canadian Tireand divide by theWeighted Average # of Common and Class A shares outstanding(these amounts may be found on p. 10 of the 2022 report and p. 6 of the 2021 report). ** be sure to convert the Net Income number to millions of dollars (multiply it by 1 million) for use in the formula so that common units are being used.

f) Debt to Total Assets

• Total Liabilities/Total Assets (amounts from the Consolidated Balance Sheet pages will be needed)

Horizontal Analysis

Using the spreadsheet template provided, prepare a horizontal analysis of the consolidated income statement (from Revenue to Net Income). Calculate the increase or decrease in each account and from 2021 to 2022, in both $ and %. All of the required numbers to calculate this may be found on the Consolidated Statements of Income for 2022 - p. 81

Vertical Analysis

Using a spreadsheet, prepare a vertical analysis of the 2021 and 2022 balance sheet amounts for Total Current Assets, Total Assets, Total Current Liabilities, Total Liabilities, Total Equity, Total Liabilities & Equity. Calculate the component % for each of the totals listed above as a % of total assets). The required numbers for this may be found on p. 80 of the 2022 Consolidated Balance Sheets.

Part 3 - Conclusion

In this section, you will use the information you gathered and analyzed in the first two sections to compare and contrast the results of 2021 & 2022.

a) Explain in which year, 2021 or 2022, that Canadian Tire Corporation was more successful in terms of the items listed below. Be sure to use information from the annual reports and the answers from calculations carried out in Part 2 of the assignment to support your answers.

i) Profitability

ii) Solvency (ability to pay debts)

iii) Shareholder Returns/Value