Compute to one decimal place the companys inventory turnover ratio and
days to sell for the most recent year, given that the cost of goods sold is
$3,397,634 (thousand). What does this information mean?
j. Does the company report an allowance for doubtful accounts on the
balance sheet or in the notes? Explain why it does or does not.
k. Do you have any concerns about Rona Inc.s ability to meet its long-term
l. What method of amortization does the company use? What amount of
depreciation and amortization expense was reported for the year ended
December 27, 2009?
m. Which of the two basic reporting approaches for the cash flows from
operating activities did Rona Inc. use?
n. In the 2009 fiscal year, Rona generated $283 million from operating
activities. Where did Rona spend this money? List the two largest cash
PART FIVE: BENCHMARKING
1. For the company, Home Depot (Appendix B), please provide the following
information for the 2009 year:
a. What type of business organization is it?
b. What types of products or services does it sell?
c. On what day of the year does its fiscal year end?
d. Are its financial statements audited by independent CAs? Is so, by whom?
e. Show the relationship between the income statement, the statement of
retained earnings, the balance sheet and the cash flow statement.
2. Calculate financial ratios to assess profitability, liquidity and solvency and
compare the results for Home Depot with those of Rona Inc. (Use two ratios for
3. What are the pitfalls of performing such comparisons?
PART SIX: INVESTMENT POTENTIAL
1. What is “big bath” accounting and why do companies sometimes engage in it? Do
you see any evidence of this at Rona Inc. in recent years?
2. If Rona Inc. were interested in managing its earnings, which financial statement
estimates could it “manage” to achieve this goal?
3. Describe something you found very interesting while reading Rona Inc.s
financial statement notes.
4. Based solely on the information gathered so far in this review, would you be
interested in investing in Rona Inc.? Why?