S&P Projects

The following questions can be used with Standard & Poor's Educational Version of Market Insight.

Equity Multiplier
Use the balance sheets for Canadian Pacific Railway Ltd. (CP), Biovail Corp. (BVF), Barrick Gold Corp. (ABX), and Alcan Inc. (AL) to calculate the equity multiplier for each company over the most recent two years. Comment on any similarities or differences between the companies and explain how these might affect the equity multiplier.

Inventory Turnover
Use the financial statements for IPSCO Inc. (IPS) and Premium Brands Inc. (FLCHF) to calculate the inventory turnover for each company over the past three years. Is there a difference in inventory turnover between the two companies? Is there a reason the inventory turnover is lower for IPSCO? What does this tell you about comparing ratios across industries?

SIC Codes
Find the SIC codes for Alliance Atlants Communications (AACB) and Lions Gate Entertainment Corp. (LGF) on each company's home page. What is the SIC code for each of these companies? What does the business description say for each company? Are these companies comparable? What does this tell you about comparing ratios for companies based on SIC codes?

Calculating the Du Pont Identity
Find the annual income statements and balance sheets for BCE Inc. (BCE) and Big Rock Brewery Ltd. (BEERF). Calculate the Du Pont identity for each company for the most recent three years. Comment on the changes in each component of the Du Pont identity for each company over this period and compare the components between the two companies. Are the results what you expected? Why or why not?

Ratio Analysis
Look under "Valuation" and download the "Profitability" spreadsheet for Air Canada (ACNAF), Southwest Airlines (LUV) and Continental Airlines (CAL). Find the ROA (Net ROA), ROE (Net ROE), PE ratio (P/E-High and P/E-low), and the market-to-book ratio (Price/Book-high and Price/Book-low) for each company. Since stock prices change daily, PE and market-to-book ratios are often reported as the highest and lowest values over the year, as is done in this instance. Look at these ratios for all three companies over the past five years. Do you notice any trends in these ratios? Which company appears to be operating at a more efficient level based on these four ratios? If you were going to invest in an airline, which one (if any) of these companies would you choose based on this information? Why?