Loblaw Companies Limited (Loblaw) is a Canadian food retailer that owns 1,000 corporate and franchise supermarkets that operate under 22 regional and market segment banners. Loblaw brands include President's Choice, No Name, Joe Fresh, T&T, Everyday Living, Exact, Seaquest, Azami, and Teddy's Choice. Loblaw is a public company, and its shares are listed on the Toronto stock exchange. Below you will find the 2016 and 2015 consolidated balance sheets (statement of financial position). You will also find some excerpts from its notes section. All amounts are in millions of Canadian dollars. The fiscal year of the Company ends on the Saturday closest to December 31. Any references below to 2015 relate to the fiscal year ended January 2, 2016. and any references below to 2016 relate to the fiscal year ended December 31, 2016. SEE THE FORMULA SHEET ON THE TEXTBOOK EXHIBIT 12.5 FOR FINANCIAL STATEMENT RATIOS. REQUIRED: a) Calculate the following ratios for both 2016 and 2015:a. Current ratio b. Quick ratio b) Based on your calculation in a), comment on the liquidity of Loblaw and how/ifit has changed between fiscal year 2015 and 2016. old is $33,213 million for 2016 and $32,846 million for 2015. Inventory balance was $4,309 million for 2014. Calculate the followings for both 2016 and 2015: a. Inventory turnover b. Days to sell inventory d) Based on the brief description of Loblaw and your understanding of retail business operations, do you think your calculations in c) are reasonable and why? e) Use the information below from Note 12 "Inventories and answer the following: a. Prepare a journal entry to record the write-down of inventories. b. Give two examples and explain why a write-down of inventories is necessary for Loblaw. Note 12 Inventories For inventories recorded as at December 31, 2016, the Company recorded $22 million as an expense for the write-down of inventories below cost to net realizable value. The write-down was included in the cost of merchandise inventories sold. f) Calculate the debt-to-equity ratio for 2016. Explain what this ratio measures and why creditors want to see this ratio. g) Answer the following questions: a. Loblaw has an unlimited number of authorized shares on each class of shares. Why do many companies today prefer to have an unlimited authorized number of shares? b. List and explain three differences between common shares and preferred shares. c. Based on the information available, are you able to determine the net income for the year ended December 31, 2016? Show your detailed calculations or explain why not. d. The unit price for Loblaw's common shares was $70.33 on December 31, 2016 and $63.92 on December 31, 2015. Note 24 "Share Capital" (not provided) indicated the following: 2016 2015 Dividends declared per share ($) Common Share $1.03 $0.0995 What is the dividend yield for common shareholders in each of 2016 and 2015? If you are a common shareholder, are you happy to see the change and why? Loblaw Companies Limited Consolidated Balance Sheet As of December 31 (in millions of Canadian Dollars) 2016 2015 Assets Current Assets Cash and cash equivalents $ 1,314 $ 1,018 Short term investments 241 6 4 Accounts receivable 4,048 4,115 Inventories 4,371 4,322 Prepaid expenses and other assets 230 3 36 Total Current Assets $ 10,204 $ 9,855 Non-current Assets Fixed assets 11,592 11,558 Intangible assets 8,745 9,164 Goodwill 3,895 3 ,780 Total Non-current Assets $ 24,232 $ 24,502 Total Assets $ 34,436 $ 34,357 Liabilities Current Liabilities Bank Indebtedness $ 115 $ 143 Trade payables 5,091 5,106 Provisions And other liabilities 1,736 1,973 Total Current Liabilities $ 6,942 $ 7,222 Non-Current liabilities Long term debt and other liabilities $ 14,466 $ 14,011 Total liabilities $ 21,408 $ 21,233 Equity Share capital $ 7,913 $ 8,072 Retained Earnings 4,944 4,914 Contributed surplus 112 102 Accumulated other comprehensive income 33 23 Non-controlling interest 26 13 Total Equity $ 13,028 $ 13,124 Total Liabilities and Equity $ 34,436 $ 34,357 Loblaw Companies Limited (Loblaw) is a Canadian food retailer that owns 1,000 corporate and franchise supermarkets that operate under 22 regional and market segment banners. Loblaw brands include President's Choice, No Name, Joe Fresh, T&T, Everyday Living, Exact, Seaquest, Azami, and Teddy's Choice. Loblaw is a public company, and its shares are listed on the Toronto stock exchange. Below you will find the 2016 and 2015 consolidated balance sheets (statement of financial position). You will also find some excerpts from its notes section. All amounts are in millions of Canadian dollars. The fiscal year of the Company ends on the Saturday closest to December 31. Any references below to 2015 relate to the fiscal year ended January 2, 2016. and any references below to 2016 relate to the fiscal year ended December 31, 2016. SEE THE FORMULA SHEET ON THE TEXTBOOK EXHIBIT 12.5 FOR FINANCIAL STATEMENT RATIOS. REQUIRED: a) Calculate the following ratios for both 2016 and 2015:a. Current ratio b. Quick ratio b) Based on your calculation in a), comment on the liquidity of Loblaw and how/ifit has changed between fiscal year 2015 and 2016. old is $33,213 million for 2016 and $32,846 million for 2015. Inventory balance was $4,309 million for 2014. Calculate the followings for both 2016 and 2015: a. Inventory turnover b. Days to sell inventory d) Based on the brief description of Loblaw and your understanding of retail business operations, do you think your calculations in c) are reasonable and why? e) Use the information below from Note 12 "Inventories and answer the following: a. Prepare a journal entry to record the write-down of inventories. b. Give two examples and explain why a write-down of inventories is necessary for Loblaw. Note 12 Inventories For inventories recorded as at December 31, 2016, the Company recorded $22 million as an expense for the write-down of inventories below cost to net realizable value. The write-down was included in the cost of merchandise inventories sold. f) Calculate the debt-to-equity ratio for 2016. Explain what this ratio measures and why creditors want to see this ratio. g) Answer the following questions: a. Loblaw has an unlimited number of authorized shares on each class of shares. Why do many companies today prefer to have an unlimited authorized number of shares? b. List and explain three differences between common shares and preferred shares. c. Based on the information available, are you able to determine the net income for the year ended December 31, 2016? Show your detailed calculations or explain why not. d. The unit price for Loblaw's common shares was $70.33 on December 31, 2016 and $63.92 on December 31, 2015. Note 24 "Share Capital" (not provided) indicated the following: 2016 2015 Dividends declared per share ($) Common Share $1.03 $0.0995 What is the dividend yield for common shareholders in each of 2016 and 2015? If you are a common shareholder, are you happy to see the change and why? Loblaw Companies Limited Consolidated Balance Sheet As of December 31 (in millions of Canadian Dollars) 2016 2015 Assets Current Assets Cash and cash equivalents $ 1,314 $ 1,018 Short term investments 241 6 4 Accounts receivable 4,048 4,115 Inventories 4,371 4,322 Prepaid expenses and other assets 230 3 36 Total Current Assets $ 10,204 $ 9,855 Non-current Assets Fixed assets 11,592 11,558 Intangible assets 8,745 9,164 Goodwill 3,895 3 ,780 Total Non-current Assets $ 24,232 $ 24,502 Total Assets $ 34,436 $ 34,357 Liabilities Current Liabilities Bank Indebtedness $ 115 $ 143 Trade payables 5,091 5,106 Provisions And other liabilities 1,736 1,973 Total Current Liabilities $ 6,942 $ 7,222 Non-Current liabilities Long term debt and other liabilities $ 14,466 $ 14,011 Total liabilities $ 21,408 $ 21,233 Equity Share capital $ 7,913 $ 8,072 Retained Earnings 4,944 4,914 Contributed surplus 112 102 Accumulated other comprehensive income 33 23 Non-controlling interest 26 13 Total Equity $ 13,028 $ 13,124 Total Liabilities and Equity $ 34,436 $ 34,357