You are hired by a large hedge fund based in Ontario as an equity researcher and are assigned to a team that covers the consumer staples industry. As a rookie researcher, your boss asks you produce some analysis reports on some local small-cap stocks and make some recommendations. Among the list of stocks, Andrew Peller Limited caught your attention because you read that the companys fundamentals have been decent and that the company recently announced an increase in dividend payment to its shareholders.

You asked your boss whether Andrew Peller could be a good starting point that fits the hedge funds investment vision. Your boss quickly scanned through the companys financials and replied, it looks like a company that has stable operations and pays its dividends, but our fund is really looking for those small-cap stocks that can have good growth potentials Also, this company only does alcoholic beverage products in Canada, seems like it can be risky too.

Your boss continues,

As a starting point, crunch some numbers and show me how the company has been doing over the last 3 years. In particular, please try to answer for yourself the following three questions.

(1) How is the companys financial performance over the last three fiscal years (i.e., FY2021, FY2020, FY2019)? Why has the companys gross margin decreased in 2021, yet its EPS increased? (15 Marks)

(2) What do the relevant ratios tell you about the most recent balance sheet as well as any changes over time? Are there any ratios that we should be worried about? (15 Marks)

(3) What do the cash flow patterns of the company tell you? Is there evidence that the company is stable and growing and why? Is the companys plan to increase dividends justified (hint: check the free cash flows to shareholders)? (15 Marks)

Fido il 03 $41% | 18:48 Accounts final Excel file.xlsx Not saved yet 5 d 8+ : Use the ratios from Chapter 12 as a starting point for your analysis. 2021 2020 Accounts Recievable Inventories Prepaid and other assets Current assets Total assets 28896 178727 4879 225302 542521 AP 2020 34096 170779 3998 214114 513919 2019 29801 160537 4626 196700 467019 2021 785300 1291100 507500 3044500 27104800 Constellation 2020 864800 1373600 535800 3484100 27323200 2019 846900 2130400 613100 3684000 29231500 Diamond estates wine and spirit 2021 2019 2684.546 3406.053 2906.154 23418.282 22099.156 19462.687 254.101 266.146 232.592 26356.929 25771.355 22601,433 49819.991 49951.228 45735.18 7220.669 26764.811 6342.5 7713.903 Accounts payable Current liabilities Long term interest bearing debts(Net Debt) Total liabilities 46487 54618 172524 276947 53821 130460 97447 268396 47451 99395 107887 232268 460000 1269100 9981700 13175700 557600 2311800 11864300 14848900 616700 3163800 12731400 16394300 4734.792 5955.454 22990.244 31632.694 29505.486 30094.926 Shareholders equity Net earings per share Dividends per share 265574 1.22 245523 1.03 234751 0.95 13929100 19.92 5.72 12474300 -0.14 5.72 12837200 34.81 5.64 18187.297 -0.013 20445.742 -0.021 15640.254 -0.02 1 = INCOME STATEMENT A Credit Sales COGS excluding amortization * EBITDA (Sales - COGS) Credit Purchase 393036 236518 156518 244466 382306 216056 166250 226298 381796 222.788 159.008 223,171 8614900 4148900 4466000 4066400 8343500 4191600 4151900 3434800 8116000 4035700 4080300 4082100 25552.514 15021.371 10531.143 16340.497 act 26794.23 14681.665 12112.565 17318.134 28123.103 15892.516 12230.587 18318.099 no Accounts Ratios + Fido $41% | 18:48 Long term interest Deanng depts(Ivet Dept) Total liabilities 172524 276947 97447 268396 107887 232268 yyo I/UU 13175700 11804 SUU 14848900 12131400 16394300 22990.244 31632.694 29505.486 30094.926 Shareholders equity Net eamings per share Dividends per share 265574 1.22 245523 1.03 234751 0.95 13929100 19.92 5.72 12474300 -0.14 5.72 IT 12837200 34.81 5.64 18187.297 -0.013 20445.742 -0.021 15640.254 -0.02 = INCOME STATEMENT Credit Sales COGS excluding amortization EBITDA (Sales - COGS) Credit Purchase Gross Profit Interest Expense Net Income 393036 236518 156518 244466 156518 8108 27786 382306 216056 166250 226298 166250 8107 23494 381796 222.788 159,008 223,171 159008 6872 21958 8614900 4148900 4466000 4066400 4466000 385700 2031800 8343500 4191600 4151900 3434800 4151900 428700 21400 8116000 4035700 4080300 4082100 4080300 367100 3459100 25552.514 15021.371 10531.143 16340.497 10531.143 939.66 -2635.213 26794.23 14681.665 12112.565 17318.134 12112.565 1113.986 4186.039 28123.103 15892.516 12230.587 18318.099 12230,587 1164.394 -3271.245 STATEMENT OF CASH FLOWS Cash flows from operating activities Net Capital expenditures (puchase-sale of equipments) 41119 36539 31543 23308 49044 23368 2806500 -133900 2551100 484700 2246300 859600 -3625.86 481.138 4341.893 288.401 -2155.14 737.424 11 A o . Fido $41% | 18:50 Accounts final Excel file.xlsx Not saved yet 5 8+ : B E G H 1 J K L M N 0 P Q R 1 Constellation 2020 Diamond Estates 2021 2020 3 2021 2019 Use the ratios from Chapter 12 as a starting point for your analysis. AP 2021 2020 2019 Liquidity Ratio Current Ratio 4.1251 1.6412 1.9790 Quick ratio 0.7634 0.3015 0.3173 2019 4 5 2.3989 0.9817 1.5071 0.6812 1.1644 0.2973 4.4257 0.4508 0.9629 0.1273 2.9300 0.3767 6 7 8 9 Activity ratio A/R Turnover ratio Average Collection Period 12.4789 29.2493 11.9663 30.5023 12.4756 29.2572 10.4417 34.9561 9.7488 37.4406 10.0006 36.4978 8.3908 43.5000 8.4897 42.9935 9.8648 37.0004 10 11 12 13 Inventory Turnover Days to sell Inventory 1.3534 269.6828 1.3042 279.8588 1.3894 262.6987 3.1140 117.2137 2.3925 152.5623 1.9152 190.5811 0.6600 553.0076 0.7065 516.6333 0.8708 419.1414 14 15 A/P Turnover Ratio AJP Payment period 4.8743 74.8824 4.4691 81.6717 5.5203 66.1199 7.9921 45.6699 5.8500 62.3937 6.7534 54.0468 2.7336 133.5254 2.5537 142.9299 2.9515 123.6651 10 17 A 18 19 20 Solvency Ratios Debt to Equity Debt as percentage of total capitalizat Interest Coverage Cash flows to total liabilities 0.6496 0.3938 19.3041 0.1485 0.3969 0.2841 20.5070 0.1175 0.4596 0.3149 23.1385 0.2112 0.7166 0.4175 11.5789 0.2130 0.9511 0.4875 9.6849 0.1718 0.9918 0.4979 11.1150 0.1370 1.2641 0.5583 11.2074 -0.1146 0.0000 0.0000 10.8732 -0.1472 0.0000 0.0000 10.5038 -0.0716 21 22 23 Accou... Ratios + Fido 941% 18:50 @ % E G 1 K M N 0 B 14.8824 D 81.6/17 F 66.1199 H 45.6699 A/P Payment period L 54.0468 62.3937 16 142.9299 133.5254 R 123.6651 17 0.6496 0.3938 19.3041 0.1485 0.3969 0.2841 20.5070 0.1175 0.4596 0.3149 23.1385 0.2112 0.7166 0.4175 11.5789 0.2130 0.9511 0.4875 9.6849 0.1718 0.9918 0.4979 11.1150 0.1370 1.2641 0.5583 11.2074 -0.1146 0.0000 0.0000 10.8732 -0.1472 0.0000 0.0000 10.5038 -0.0716 21 22 18 Solvency Ratios 19 Debt to Equity 20 Debt as percentage of total capitalizat Interest Coverage Cash flows to total liabilities 23 Profitability Ratios Gross margin 26 Profit margin 27 Return on Equity 28 Return on assest 24 25 0.3982 0.0707 0.1087 0.0526 0.4349 0.0615 0.0978 0.0479 0.4165 0.0575 0.0965 0.0475 0.5184 0.2358 0.1539 0.0747 0.4976 0.0026 0.0017 0.0008 0.5027 0.4262 0.3321 0.1390 0.4121 -0.1031 -0.1364 -0.0528 0.4521 -0.1562 -0.2320 -0.0875 0.4349 -0.1163 -0.2051 -0.0744 29 31 1.22 1.03 0.9500 19.9200 -0.1400 34.8100 -0.0130 -0.0210 -0.0200 32 30 Equity Ratios Basic earnings per share Price to earnings ratio Dividends Payout Dividends yield Net Free Cash Flow 33 34 35 4580 8235 25676 2940400 2066400 1386700 -4107 -4630 -2893 36 37 38 39 40 41 42 o 43 44 45 46 47 48 49 50 51 52 53 Fido il 03 $41% | 18:48 Accounts final Excel file.xlsx Not saved yet 5 d 8+ : Use the ratios from Chapter 12 as a starting point for your analysis. 2021 2020 Accounts Recievable Inventories Prepaid and other assets Current assets Total assets 28896 178727 4879 225302 542521 AP 2020 34096 170779 3998 214114 513919 2019 29801 160537 4626 196700 467019 2021 785300 1291100 507500 3044500 27104800 Constellation 2020 864800 1373600 535800 3484100 27323200 2019 846900 2130400 613100 3684000 29231500 Diamond estates wine and spirit 2021 2019 2684.546 3406.053 2906.154 23418.282 22099.156 19462.687 254.101 266.146 232.592 26356.929 25771.355 22601,433 49819.991 49951.228 45735.18 7220.669 26764.811 6342.5 7713.903 Accounts payable Current liabilities Long term interest bearing debts(Net Debt) Total liabilities 46487 54618 172524 276947 53821 130460 97447 268396 47451 99395 107887 232268 460000 1269100 9981700 13175700 557600 2311800 11864300 14848900 616700 3163800 12731400 16394300 4734.792 5955.454 22990.244 31632.694 29505.486 30094.926 Shareholders equity Net earings per share Dividends per share 265574 1.22 245523 1.03 234751 0.95 13929100 19.92 5.72 12474300 -0.14 5.72 12837200 34.81 5.64 18187.297 -0.013 20445.742 -0.021 15640.254 -0.02 1 = INCOME STATEMENT A Credit Sales COGS excluding amortization * EBITDA (Sales - COGS) Credit Purchase 393036 236518 156518 244466 382306 216056 166250 226298 381796 222.788 159.008 223,171 8614900 4148900 4466000 4066400 8343500 4191600 4151900 3434800 8116000 4035700 4080300 4082100 25552.514 15021.371 10531.143 16340.497 act 26794.23 14681.665 12112.565 17318.134 28123.103 15892.516 12230.587 18318.099 no Accounts Ratios + Fido $41% | 18:48 Long term interest Deanng depts(Ivet Dept) Total liabilities 172524 276947 97447 268396 107887 232268 yyo I/UU 13175700 11804 SUU 14848900 12131400 16394300 22990.244 31632.694 29505.486 30094.926 Shareholders equity Net eamings per share Dividends per share 265574 1.22 245523 1.03 234751 0.95 13929100 19.92 5.72 12474300 -0.14 5.72 IT 12837200 34.81 5.64 18187.297 -0.013 20445.742 -0.021 15640.254 -0.02 = INCOME STATEMENT Credit Sales COGS excluding amortization EBITDA (Sales - COGS) Credit Purchase Gross Profit Interest Expense Net Income 393036 236518 156518 244466 156518 8108 27786 382306 216056 166250 226298 166250 8107 23494 381796 222.788 159,008 223,171 159008 6872 21958 8614900 4148900 4466000 4066400 4466000 385700 2031800 8343500 4191600 4151900 3434800 4151900 428700 21400 8116000 4035700 4080300 4082100 4080300 367100 3459100 25552.514 15021.371 10531.143 16340.497 10531.143 939.66 -2635.213 26794.23 14681.665 12112.565 17318.134 12112.565 1113.986 4186.039 28123.103 15892.516 12230.587 18318.099 12230,587 1164.394 -3271.245 STATEMENT OF CASH FLOWS Cash flows from operating activities Net Capital expenditures (puchase-sale of equipments) 41119 36539 31543 23308 49044 23368 2806500 -133900 2551100 484700 2246300 859600 -3625.86 481.138 4341.893 288.401 -2155.14 737.424 11 A o . Fido $41% | 18:50 Accounts final Excel file.xlsx Not saved yet 5 8+ : B E G H 1 J K L M N 0 P Q R 1 Constellation 2020 Diamond Estates 2021 2020 3 2021 2019 Use the ratios from Chapter 12 as a starting point for your analysis. AP 2021 2020 2019 Liquidity Ratio Current Ratio 4.1251 1.6412 1.9790 Quick ratio 0.7634 0.3015 0.3173 2019 4 5 2.3989 0.9817 1.5071 0.6812 1.1644 0.2973 4.4257 0.4508 0.9629 0.1273 2.9300 0.3767 6 7 8 9 Activity ratio A/R Turnover ratio Average Collection Period 12.4789 29.2493 11.9663 30.5023 12.4756 29.2572 10.4417 34.9561 9.7488 37.4406 10.0006 36.4978 8.3908 43.5000 8.4897 42.9935 9.8648 37.0004 10 11 12 13 Inventory Turnover Days to sell Inventory 1.3534 269.6828 1.3042 279.8588 1.3894 262.6987 3.1140 117.2137 2.3925 152.5623 1.9152 190.5811 0.6600 553.0076 0.7065 516.6333 0.8708 419.1414 14 15 A/P Turnover Ratio AJP Payment period 4.8743 74.8824 4.4691 81.6717 5.5203 66.1199 7.9921 45.6699 5.8500 62.3937 6.7534 54.0468 2.7336 133.5254 2.5537 142.9299 2.9515 123.6651 10 17 A 18 19 20 Solvency Ratios Debt to Equity Debt as percentage of total capitalizat Interest Coverage Cash flows to total liabilities 0.6496 0.3938 19.3041 0.1485 0.3969 0.2841 20.5070 0.1175 0.4596 0.3149 23.1385 0.2112 0.7166 0.4175 11.5789 0.2130 0.9511 0.4875 9.6849 0.1718 0.9918 0.4979 11.1150 0.1370 1.2641 0.5583 11.2074 -0.1146 0.0000 0.0000 10.8732 -0.1472 0.0000 0.0000 10.5038 -0.0716 21 22 23 Accou... Ratios + Fido 941% 18:50 @ % E G 1 K M N 0 B 14.8824 D 81.6/17 F 66.1199 H 45.6699 A/P Payment period L 54.0468 62.3937 16 142.9299 133.5254 R 123.6651 17 0.6496 0.3938 19.3041 0.1485 0.3969 0.2841 20.5070 0.1175 0.4596 0.3149 23.1385 0.2112 0.7166 0.4175 11.5789 0.2130 0.9511 0.4875 9.6849 0.1718 0.9918 0.4979 11.1150 0.1370 1.2641 0.5583 11.2074 -0.1146 0.0000 0.0000 10.8732 -0.1472 0.0000 0.0000 10.5038 -0.0716 21 22 18 Solvency Ratios 19 Debt to Equity 20 Debt as percentage of total capitalizat Interest Coverage Cash flows to total liabilities 23 Profitability Ratios Gross margin 26 Profit margin 27 Return on Equity 28 Return on assest 24 25 0.3982 0.0707 0.1087 0.0526 0.4349 0.0615 0.0978 0.0479 0.4165 0.0575 0.0965 0.0475 0.5184 0.2358 0.1539 0.0747 0.4976 0.0026 0.0017 0.0008 0.5027 0.4262 0.3321 0.1390 0.4121 -0.1031 -0.1364 -0.0528 0.4521 -0.1562 -0.2320 -0.0875 0.4349 -0.1163 -0.2051 -0.0744 29 31 1.22 1.03 0.9500 19.9200 -0.1400 34.8100 -0.0130 -0.0210 -0.0200 32 30 Equity Ratios Basic earnings per share Price to earnings ratio Dividends Payout Dividends yield Net Free Cash Flow 33 34 35 4580 8235 25676 2940400 2066400 1386700 -4107 -4630 -2893 36 37 38 39 40 41 42 o 43 44 45 46 47 48 49 50 51 52 53