Canadian Tire Corporation, Limited is one of Canada's best-known retailers. Obtain a copy of Canadian Tire's financial statements for each of the years ended December 30, 2017, and December 31, 2016, through SEDAR (www.sedar.com) or on the company's website. To answer the following questions, you may also want to consult the 10-year financial review that is supplementary information in the 2016 annual report.

Instructions

a. How significant is Canadian Tire's investment in property, plant, and equipment, including any investment property, compared with its total investment in assets? Compare this with sample companies in other industries, such as financial services (AGF Management Limited), real estate management and development (Brookfield Asset Management Inc.), and technology (The Stars Group Inc.). Comment.

b. Calculate Canadian Tire's total asset turnover for fiscal years 2017, 2016, and 2015.

c. Calculate the company's profit margin for the same three years.

d. Calculate the company's return on assets for the same three years by using the ratios calculated in parts (b) and (c) above.

e. Based on your calculations in part (d), suggest ways in which Canadian Tire might increase the return that it earns on its investment in assets.

4.0 Historical Performance Highlights 4.1 Selected Annual Consolidated Financial Trends The following table provides selected annual consolidated financial and non-financial information for the last three fiscal periods. The financial information has been prepared in accordance with IFRS. (C$ in millions, except per share amounts and number of retail locations) 2016 2015 2017 13,434.9 $ Revenue $ 12,681.0 $ 12,279.6 818.8 747.5 735.9 Net income Basic EPS 10.70 9.25 8.66 Diluted EPS 10.67 9.22 8.61 Total assets 15,624.2 6,311.8 5,263.9 1,702 2.8500 $ 15,302.8 6,027.3 4,911.9 Total non-current financial liabilities Financial Services gross average accounts receivables (total portfolio) Number of retail locations Cash dividends declared per share Stock price (CTC.A)2 14,987.8 5,778.6 4,838.7 1,698 1,702 $ 2.3750 $ 2.1500 163.90 139.27 118.16 1 Includes short and long-term deposits, long-term debt including the current portion, long-term derivative liabilities included in other long-term liabilities, and the redeemable financial instrument. Closing share price as of the date closest to the Company's fiscal year-end. 2 7.0 Financial Performance 71 Consolidated Financial Performance Non-Operational Items The results of operations in the current and previous quarters and years ended December 30, 2017 and December 31, 2016 did not include material non- operational items. As a result, the Company has not included a measure of "normalized" earnings or "normalized" diluted EPS in this MD&A. 7.1.1 Consolidated Financial Results (C$ in millions, except where noted) Q4 2017 Q4 2016 2017 2016 Change 4.9 % $ Change 4.2 % Retail sales $ 4,599.3 $ 4,383.5 14,980.7 $ 14,370.6 Revenue $ 3,641.0 12,681.0 5.9 % 3,964.0 $ 1,393.9 $ $ 1,296.7 13,434.9 $ 4,638.4 $ 34.5% 4,392.5 5.6 % 35.2% 35.6% 8.9 % $ 7.5 % $ (45) bps (114.7)% $ 5.4 % 34.6% $ 2.4 0.2 $ Gross margin dollars Gross margin as a % of revenue Other (income) expense Selling, general and administrative expenses Net finance costs Income before income taxes (4.3) (11) bps (103.9)% 3.7 % 910.8 (0.3) $ 959.8 30.1 404.3 $ 108.9 3,291.9 93.9 25.4 358.1 18.2 % 12.9 % $ $ 3,413.1 112.6 1,112.5 $ 293.7 26.4% 1,011.0 19.9 % 10.0 % 11.4 % Income taxes 93.0 17.0 % 263.5 Effective tax rate 26.9% 26.0% 26.1% Net income $ 295.4 $ 265.1 11.4 % $ 818.8 $ 747.5 9.5 % Net income attributable to: Shareholders of Canadian Tire Corporation Non-controlling interests $ 246.8 735.0 $ 669.1 9.9 % 275.7 $ 19.7 11.7 % $ 7.6 % 18.3 83.8 78.4 6.8 % $ 295.4 $ 265.1 818.8 $ 747.5 9.5 % Basic EPS $ 4.12 $ 3.47 11.4 % $ 18.6 % $ 18.5 % $ 10.70 $ 9.25 15.7 % Diluted EPS $ 4.10 $ 3.46 10.67 $ 9.22 15.7 % NM2 68,678,840 NM2 Weighted average number of Common and Class A Non-Voting Shares outstanding: Basic 66,985,467 71,101,887 Diluted 67,188,141 71,249,119 1 key operating performance measure. Refer to section 11.3.1 in this MD&A for additional information. ? Not meaningful 72,360,303 72,555,732 NM2 68,871,847 NM2 4.0 Historical Performance Highlights 4.1 Selected Annual Consolidated Financial Trends The following table provides selected annual consolidated financial and non-financial information for the last three fiscal periods. The financial information has been prepared in accordance with IFRS. (C$ in millions, except per share amounts and number of retail locations) 2016 2015 2017 13,434.9 $ Revenue $ 12,681.0 $ 12,279.6 818.8 747.5 735.9 Net income Basic EPS 10.70 9.25 8.66 Diluted EPS 10.67 9.22 8.61 Total assets 15,624.2 6,311.8 5,263.9 1,702 2.8500 $ 15,302.8 6,027.3 4,911.9 Total non-current financial liabilities Financial Services gross average accounts receivables (total portfolio) Number of retail locations Cash dividends declared per share Stock price (CTC.A)2 14,987.8 5,778.6 4,838.7 1,698 1,702 $ 2.3750 $ 2.1500 163.90 139.27 118.16 1 Includes short and long-term deposits, long-term debt including the current portion, long-term derivative liabilities included in other long-term liabilities, and the redeemable financial instrument. Closing share price as of the date closest to the Company's fiscal year-end. 2 7.0 Financial Performance 71 Consolidated Financial Performance Non-Operational Items The results of operations in the current and previous quarters and years ended December 30, 2017 and December 31, 2016 did not include material non- operational items. As a result, the Company has not included a measure of "normalized" earnings or "normalized" diluted EPS in this MD&A. 7.1.1 Consolidated Financial Results (C$ in millions, except where noted) Q4 2017 Q4 2016 2017 2016 Change 4.9 % $ Change 4.2 % Retail sales $ 4,599.3 $ 4,383.5 14,980.7 $ 14,370.6 Revenue $ 3,641.0 12,681.0 5.9 % 3,964.0 $ 1,393.9 $ $ 1,296.7 13,434.9 $ 4,638.4 $ 34.5% 4,392.5 5.6 % 35.2% 35.6% 8.9 % $ 7.5 % $ (45) bps (114.7)% $ 5.4 % 34.6% $ 2.4 0.2 $ Gross margin dollars Gross margin as a % of revenue Other (income) expense Selling, general and administrative expenses Net finance costs Income before income taxes (4.3) (11) bps (103.9)% 3.7 % 910.8 (0.3) $ 959.8 30.1 404.3 $ 108.9 3,291.9 93.9 25.4 358.1 18.2 % 12.9 % $ $ 3,413.1 112.6 1,112.5 $ 293.7 26.4% 1,011.0 19.9 % 10.0 % 11.4 % Income taxes 93.0 17.0 % 263.5 Effective tax rate 26.9% 26.0% 26.1% Net income $ 295.4 $ 265.1 11.4 % $ 818.8 $ 747.5 9.5 % Net income attributable to: Shareholders of Canadian Tire Corporation Non-controlling interests $ 246.8 735.0 $ 669.1 9.9 % 275.7 $ 19.7 11.7 % $ 7.6 % 18.3 83.8 78.4 6.8 % $ 295.4 $ 265.1 818.8 $ 747.5 9.5 % Basic EPS $ 4.12 $ 3.47 11.4 % $ 18.6 % $ 18.5 % $ 10.70 $ 9.25 15.7 % Diluted EPS $ 4.10 $ 3.46 10.67 $ 9.22 15.7 % NM2 68,678,840 NM2 Weighted average number of Common and Class A Non-Voting Shares outstanding: Basic 66,985,467 71,101,887 Diluted 67,188,141 71,249,119 1 key operating performance measure. Refer to section 11.3.1 in this MD&A for additional information. ? Not meaningful 72,360,303 72,555,732 NM2 68,871,847 NM2