This case is based on the financial statements of Canadian Tire, which you can find in Appendix A at the back of the book and on My-Accounting-Lab. As you work with Canadian Tire's financial statements throughout this course, you will develop the ability to use actual financial statements.

Requirements

1. Suppose you own shares in Canadian Tire. If you could pick one item on the company's income statement to increase year after year, what would it be? Why is this item so important? Did this item increase or decrease during the year ended January 3, 2015? Is this good news or bad news for the company?

2. What was Canadian Tire's largest expense each year? In your own words, explain the meaning of this item. Give specific examples of items that make up this expense. Why is this expense less than sales revenue?

3. Use the balance sheet as at January 3, 2015, to answer these questions. At January 3, 2015, how much in total resources did Canadian Tire have to work with? How much did the company owe? How much of its assets did the company's shareholders actually own? Use these amounts to write Canadian Tire's accounting equation at January 3, 2015 (express all items in thousands of dollars).

4. How much cash did Canadian Tire have at December 28, 2013? How much cash did it have at January 3, 2015? Where does Canadian Tire get most of its cash? How does the company spend its cash?