High Liner Foods Incorporated, which is headquartered in Lunenburg, Nova Scotia, operates in the North American packaged foods industry. The company€™s brands include High Liner, Fisher Boy, FPI, Sea Cuisine, Mirabel, and Royal Sea. The company also manufactures products for private labels. The information in Exhibit 7-25 was taken from the company€™s 2014 annual report.

Required:
a. Note 8 (Exhibit) breaks down High Liner€™s inventory into numerous categories. Which categories of inventory do you believe should be used in determining the inventory turnover ratio? Why?
b. Describe High Liner€™s inventory valuation policies in your own words. Specifically, explain what High Liner includes in inventory cost, what cost formula(s) the company uses, and how it values its inventory on the statement of financial position.
c. Does High Liner use the same cost formula for all of its inventories? If not, explain what methods are used for which inventories and why this might be the case.
d. Calculate the inventory turnover ratio and days to sell inventory ratio for 2013 and 2012. Use the year-end inventory balances instead of the average inventory amounts.

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HIGH LINER FOODS INCORPORATED'S 2013 CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF FINANCIAL POSITION (in thousands of U.S. dollars) Notes 28-Dec-13 29-Dec-12 note 27) Cash Accounts receivable Income taxes receivable Other financial assets $1,206 91,334 3,509 1,524 254,072 2,952 354,597 65 73,947 5,145 533 222,313 2,991 304,994 Prepaid expenses Total current assets Non-current: Property, plant and equipment Deferred income taxes Other receivables and miscellaneous assets Intangible assets 97,503 4,656 1,906 105,253 111,999 321,317 542 $676,456 89,268 7,207 2,035 110,631 112,873 322,014 4,819 631,827 20 Total non-current assets Assets classified as held for sale Total assets LIABILITIES AND SHAREHOLDERS' EQUITY 12 10 $ 97,227 103,215 240 S 59,704 101,441 1,614 550 1,165 34,237 1,039 199,750 Bank loans Accounts payable and accrued liabilities Other current financial liabilities Income taxes payable Gurrent portion of long-term debt Gurrent portion of finance lease obligations 2,543 13 13 979 Total current liabilities 204,663 Non-current: Long-term debt Other long-terrm financial liabilities Other long-terrm liabilities Long-term finance lease obligations Deferred income taxes Future employee benefits 226,929 5,597 1,044 1,647 43,998 7,929 287,144 213,359 1,130 1,532 2,181 45,126 13,791 277,119 1,604 478,473 13 14 Total non-current liabilities Liabilities directly associated with the assets heid for sale Total liabilities Shareholders' equity: 491,807 Common shares Gontributed surplus Retained eanings Accumulated other comprehensive (loss) income 16 13,781 90,792 (184) 184,649 676,456 75,169 7,719 66,373 4,093 153,354 $631,827 Total shareholders' equity Total liabilities and shareholders' equity HIGH LUNER FOODS INCORPORATED'S 2013 CONSOLIDATED STATEMENT OF INCOME CONSOLIDATED STATEMENT OF INCOME Fifty-two weeks ended in thousands of U.S. dollars, except per share amounts)Notes Revenues Cost of sales Gross profit Distribution expenses Selling, general and administrative expenses Impairment of property, plant and equipment Business acquisition, integration and other expenses Results from operating activities Finance costs (Income) loss from equity accounted investee, net of income tax Income before income taxes Income taxes 28-Dec-13 29-Dec-12 $942,631 735,970 206,661 44,511 100,862 13,230 10,741 37,317 36,585 196 536 $ 947,301 731,884 215,417 53,368 98,902 3,258 59,891 16,329 (86) 43,648 Current Deferred 12,378 (86) 12,292 S 31,356 5,442 (7,103) 20 Total income tax expense (recovery) Net income $ 2,203 EXCERPT FROM NOTES TO HIGH LINER FOODS INCORPORATED'S 2013 FINANCIAL STATEMENTS EXHIBIT 7-25C Inventories Inventories are measured at the lower of cost and net realizable value. The cost of manufactured inventories is based on the first-in first-out principle. The cost of procured finished goods and unprocessed raw material inventory is weighted average cost. Inventory includes expenditures incurred in acquiring the inventories, production or con- version costs and other costs incurred in bringing the inventories to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Cost also may include transfers from OCI of any gain or loss on qualifying cash flow hedges of foreign currency related to purchases of inventories. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. EXCERPT FROM NOTES TO HIGH LINER FOODS INCORPORATED'S 2013 FINANCIAL STATEMENTS ECHIBIT 7-25D Total inventories at the lower of cost and net realizable value on the statement of financial position are comprised of the following: (Amounts in $000s) Finished goods- procured Finished goods manufactured Raw and semi-finished material Supplies, repair parts and other H&G, including H&G paid in advance Inventory in transit, paid in advance 28-Dec-13 29-Dec-12 76,396 78,116 78,515 69,353 10,092 13,357 6,359 254,072 70,762 43,517 14,868 7,170 8,376 222,809 Less: inventories held for sale (note 7 496) $254,072 $ 222,313 " Headless and gutted