P10-7A You have been presented with ou have been presented with the following selected information from the financial statements of one of Canada's largest dairy producers, Saputo Inc. (in millions): 2015 2014 2013 Statement of financial position Accounts receivable $ 785 $ 807 $ 625 Inventory 1,006 933 770 Total current assets 1,962 1,896 1,513 Total assets 6,800 6,357 5,194 Current liabilities 1,179 1,725 1,227 Total liabilities 3,172 3,518 2,888 Income statement Net sales $10,658 $9,223 $7,298 Cost of goods sold 7,688 6,518 5,136 Interest expense 73 69 34 Income tax expense 237 186 Net income 613 534 Instructions (a) Calculate each of the following ratios for 2015 and 2014. Industry ratios are shown in parentheses. 1. Current ratio (2015, 1.9:1; 2014, 1.7:1) 2. Receivables turnover (2015, 13.4 times; 2014, 14.0 times) 3. Inventory turnover (2015, 5.9 times; 2014, 6.1 times) 4. Debt to total assets (2015, 58.0%; 2014, 54.0%) 5. Times interest earned (2015, 3.7 times; 2014, 3.0 times) (b) Based on your results in part (a), comment on Saputo's liquidity and solvency. 225 482 P9-12A Delicious Limited competes in the fast food industry with Scrumptious Limited. Delicious embarked on a major expansion in 2018, borrowing a large amount of money and acquiring a small competitor. The acquisition doubled the number of restaurants that Delicious has. Scrumptious, on the other hand, took a more conservative approach and did not buy any new assets, focusing instead on a strategy of making existing operations more efficient. Data for the two companies are provided below (in thousands of dollars): 2018 2017 2016 Delicious Total assets $2,000 $1,100 $1,000 Net sales 3,100 1,500 1,600 Net income 350 150 140 Scrumptious Total assets 800 900 1,000 Net sales 1,900 1,700 2,000 Net income 180 200 210 Instructions (a) Calculate the (1) profit margin, (2) asset turnover, and (3) return on assets ratios for each company in 2017 and 2018. (b) Provide an explanation for the year-over-year changes in the ratios calculated in part (a)