EMPIRE COMPANY

in the following pages, you will find excerpts from the annual report of Empire Company Limited $($Empire$)$ for the year ended May $4,2019,$ including a message from the CEO, financial statements, notes to the financial statements, and management discussion and analysis. $($If you wish to see the full report, you may find it at www$.$sedar.com.$)$ You have been asked to provide investment advice to a friend who is interested in purchasing shares of this company. Please answer the following questions to address your friend$$s requirements. $($NOTE: Where ratio calculations are required, use year$-$end amounts, rather than averages.$)$

a$)$ What business is Empire engaged in$?$ What are Empire$$s two reportable business segments?

b$)$ Summarize Empire$$s strategy for managing the risk of losing market share to competitors.

c$)$ How many non$-$voting Class A shares were issued and outstanding on May $4,2019?$

d$)$ Evaluate the trend in Empire$$s liquidity, using the current ratio.

e$)$ Identify the cash flow patterns for $2019$ and $2018.$ What do these patterns tell us about Empire?

f$)$ Evaluate the trend in the company$$s profitability by calculating the return on equity and return on assets.

g$)$ Prepare a common size analysis of the consolidated statement of earnings for $2019$ and $2018.$ What significant trends do you observe? What reasons have been offered by management to explain the significant difference in profit between $2019$ and $2018?$

h$)$ Calculate the inventory turnover ratio for $2019$ and $2018$ and evaluate the result.

i$)$ Summarize Empire$$s accounting policy for inventories, and identify the cost formula that is used.

j$)$ Evaluate the trend in Empire$$s solvency, using the debt to equity ratio.

k$)$ Calculate the average age percentage of Empire$$s property and equipment for $2019$ and $2018$ and evaluate the result.

l$)$ Identify three types of intangible assets Empire owns and identify the estimated useful lives of those assets.

m$)$ Briefly summarize the Empire$$s revenue recognition policy.

n$)$ What is the purpose of Project Sunrise? How much benefit does management expect the company to realize in the fiscal $2020$ year?

o$)$ How much did Empire pay to purchase Farm Boy? How much of this purchase price was financed through the non$-$revolving credit facility?

p$)$ Evaluate the trend in the price$/$earnings ratio $($P$/$E$).$ You will need to look up the share price for the last trading day $($the Friday before the year$-$end date$)$ of each fiscal year, using TMX Money or a similar financial services website. The company$$s stock trading symbol is EMP.A$.$

q$)$ Overall, based on your analysis above, should your friend purchase Empire shares? Explain your reasoning.