You have been presented with the following selected information from the financial statements of one of Canada's largest dairy producers, Saputo Inc. (in millions): Instructions (a) Calculate each of the following ratios for 2015 and 2014. Industry ratios are shown
(a) Calculate each of the following ratios for 2015 and 2014. Industry ratios are shown in parentheses.
1. Current ratio (2015, 1.9:1; 2014, 1.7:1)
2. Receivables turnover (2015, 13.4 times; 2014, 14.0 times)
3. Inventory turnover (2015, 5.9 times; 2014, 6.1 times)
4. Debt to total assets (2015, 58.0%; 2014, 54.0%)
5. Times interest earned (2015, 3.7 times; 2014, 3.0 times)
(b) Based on your results in part P10.7A(a), comment on Saputo's liquidity and solvency.
(c) Saputo had a $1.1-billion operating line of credit, of which $170 million was used at March 31, 2015. Most of the bank debt held by the company was in U.S. dollars, which rose in value relative to the Canadian dollar in 2015. Discuss the implications of this information for your analysis.
(d) Saputo had operating lease commitments totaling $27 million in 2016 and $21 million in 2017. Discuss the implications of this information for your analysis.
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
201520142013 ei ai OS Accounts receivable Inventorv Total current assets Total assets Current liabilities Total liabilities $ 785 $ 807$ 625 1,006 933 770 1,962 1,8961,513 6,800 6,357 5,194 1,1791,725 1,227 3,172 3,518 2,888 Net sales Cost of goods sold Interest expense Income tax expense Net income $10,658 $9,223 $7,298 7,688 6,5185,136 73 69 34 237 225 186 613 534 482
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a in millions 2015 2014 1 Current ratio 1962 171 1896 111 1179 1725 2 Receivables 10658 134 times 9223 129times turnover 785 807 807 625 2 2 3 Inventory 7688 79times 6518 77 times turnover 1006 933 93…View the full answer
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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