Purpose: To help familiarize you with the financial reporting of a real company to further your understanding of the chapter material you are learning.

This case focuses on the financial statement analysis of Bombardier Inc. Recall from the chapter that stakeholders use numerous ways to analyze and, thus, better understand the financial position and results of operations of a company. Tools such as vertical and horizontal analyses are available. In addition, financial ratios can be used to gain further insight into areas such as liquidity and profitability. Other measures include earnings per share and ratios that consider the share price of the company. Finally, nonfinancial information provides additional insights into the performance and financial position of the company. We will now apply some of the analytical tools contained in the chapter. Refer to the Bombardier Annual Report, Year Ended January 31, 2011, found in MyAccountingLab.

Requirements

1. Perform a vertical analysis on the income statements (Consolidated Statements of Operations). Discuss your results. What benefit do you see in performing this analysis? Perform a horizontal analysis of the balance sheets (Consolidated Balance Sheets). Discuss your results. What benefit do you see in performing this analysis?

2. Look at the income statements (Consolidated Statements of Income). Can you find the Basic EPS for each fiscal year presented? Has the Basic Earnings per Share increased or decreased each year? Why do you think the Basic EPS has been changing?

3. Compute the return on assets and the return on equity ratios for 2011 and 2010. Use only the ending amount for shareholders' equity instead of the average to calculate ROE for both years. Has Bombardier Inc.'s profitability improved or deteriorated?