Look at Net Margin of the Year 2012 and Year 2011. It decreases from 14.62% in 2012 to 6.49% in 2011.

a. Briefly explain the change - which ratio, which two consecutive years, an increase or a decrease? b. Next, look at the income statement and balance sheet to determine, in your opinion, what caused the dramatic change. Briefly explain. Do not go online to research. Just study the Exhibits 2 and 3 to try to figure it out. - If ROA decreases, do not say it is because Net Income decreased (Net Income is the numerator in the ROA formula). That is not a deep enough analysis. Dig deep into what constitutes Net Income. Look at the line items that result in Net Income (revenue, expenses) and determine what caused the change. - Likewise, do not just say ROA decreased because Average Total Assets increased (Average Total Assets is the denominator). Look at the line items that constitute Total Assets.

D E F G H I 12/31/10 30.390 113,171 15,275 5,281 164,117 7,570 1 EXHIBIT 2: IMAX CORPORATION BALANCE SHEETS, 2010-2013 (in thousands of $) 2 Period Ending 12/31/13 12/31/12) 12/31/11 3 Current Assets 4 Cash and Cash Equivalents 29,546 21,336 18,138 5 Net Receivables 180,184 136,2001 133,373 6 Inventory 9,825 15,794 19,747 7 Other Current Assets 10,678 5,514 8 Total Current Assets 230,233 180,9001 176,772 9 Long-Term Assets 10 Fixed Assets 132,847 113,6101 101,253 11 Goodwill 39,027 39,027 39,027 12 Intangible Assets 27,745 27,911 24,913 13 Other Assets 27,0341 23,963) 14,238 14 Deferred Assets Charges 24,2591 36.46 51,046 15 Total Assets 481,145 421,872 407,249 16 Current Liabilities 17 Accounts Payable 84,628 83,8391 87,840 18 Short-Term Debt/Current Portion of Long-Term Debt 0 11,000 55,083 19 Other Current Liabilities 76,9321 73,9541 74,458 20 Total Current Liabilities 161,5601 168,793 217,381 21 Total Liabilities 161,560 168,7931 217,38 22 Stock Holders Equity 23 Common Stocks 327,313 313,744 303,395 24 Retained Earnings 43,051 87,166 128,503 25 Other Equity 35,323 26,501 14,976 26 Total Equity 319,5851 253,0791 189,868 27 Total Liabilities and Equity 481,145 421,872 407,2491 28 74,035 39,027 2,437 12,350 57,122 349,088 99,378 17,5001 73,752 190,630 190,630 292,977 141,209 6,690 158,458 349,088 29 30 31 B D E F G 12/31/10 248,614 110,962 137,652 674 1 EXHIBIT 3: IMAX CORPORATION INCOME STATEMENTS, 20102013 (in thousands of $) 2 Period Ending 12/31/13 12/31/12 12/31/11 3 Total Revenue 287,937 282,755 235,098 4 Cost Of Revenue 123,334 129,510 121,033 5 Gross Profit 164,603 153,245 114,065 6 Operating Expenses 7 Research and Development 14,771 11,411 7,829 8 Sales, General and Admin. 82,669 81,560 75,212 9 Non-Recurring Items 445 1,590 10 Other Operating Items 1,618 7061 465 11 Operating Income 65,100 58,894 28,969 12 Additional Income/Expense Items 55 85 57 13 Earnings Before Interest and Tax 65,155 58,979 29,026 14 Interest Expense 1,345 689 1,827 15 Earnings Before Tax 63,810 58,2901 27,199 16 Income Tax 16,629 15,079 9,293 Minority Interest 0 0 0 18 Equity Earnings/Loss Unconsolidated Subsidiary 2,757 1,362 1,791 19 Net Income-Cont. Operations 44,424 41,849 16,115 20 Net Income 44,115 41,337 15,260 21 Net Income Applicable to Common Shareholders 44,115 41,337 15,260 22 6,249 78,757 1,488 513 50,645 399 51,044 1,885 49,159 -52,574 0 493 101,240 101,240 101,240 fx A B D E 1 Year End 2013 Year End 2012 Year End 2011 57.17% 54.20% 48.52% 2 GROSS MARGIN 3 22.61% 20.83% 12.32% 4 15.32% 14.62% 6.49% 5 OPERATING MARGIN NET MARGIN RETURN ON EQUITY RETURN ON ASSETS CURRENT RATIO 15.41% 18.66% 8.76% 6 6.37% 6.61% 2.62% 7 1.43x 1.07x 0.81x 8 0.18x 0.13x 0.08x 9 0.53x CASH RATIO DEBT RATIO LONG TERM DEBT TO EQUITY ASSET TURNOVER 0.34x 0.09x 0.40x 0.08x 10 0.04x 0.58x 11 0.60x 0.67x