The ratios computed for Canadian Tire in this chapter are compared with those of RONA Inc. and Richelieu Hardware Ltd. The comparison of ratios across these three companies assumes that they use the same accounting methods in reporting the various elements of their financial statements.
Required:
1. Access the annual reports of the three companies through their respective websites and identify the method(s) each company uses a. to depreciate its property, plant and equipment, and b. to value its inventory at year-end.
2. Are the methods used by these companies similar or different? Explain.
3. If two of these companies used different accounting methods, what impact would the different methods have on the following ratios?
a. Net profit margin.
b. ROE.
c. Current ratio.
d. Debt-to-equity.