S&P Projects

DuPont System

Using two companies in the same industry, e.g., Barrick Gold Corp (ABX) and Echo Bay Mines Ltd. (ECO), calculate all five ratios of the DuPont System for the past three years using the annual financial statements of these companies. Comment on the reasons why ROE is different for the two companies and why ROE has changed for each company over the past three years.

Inventory Turnover

Using the financial statements, calculate the inventory turnover for Nortel Networks Corp (NT) and Alcan Inc. (AC) for the past five years. What do you notice about the difference in the inventory turnover for these two companies?

Valuation Ratio Analysis

Pick two companies in the same industry, e.g., Noranda Inc. (NRD) and Inco Ltd. (N). Examine the valuation ratios (e.g. P/E ratio) for the trailing twelve months on the Financial Highlights page. How do the companies compare to each other and the industry? If you were to invest in one of these two companies, which would it be? Why?

Profitability Ratio Analysis

Pick two companies in the same industry, e.g., Shaw Communication Inc -Cl B (SJR) and Rogers Communication -Cl B (RG). Examine the profitability ratios (e.g. ROA) for the trailing twelve months on the Financial Highlights page. Which company has generated greater profits? How do the companies compare to the industry?

Statement of Changes in Financial Position

Choose a company, e.g., Air Canada -Cl A (ACNAF), and using the most recent quarterly financial records, construct a Statement of Changes in Financial Position for that company.

Standardized Financial Statements

Pick two companies in the same industry, e.g., Imperial Oil Ltd. (IMO) and Petro-Canada (PCZ), and calculate the standardized income statement and balance sheet using the most recent quarterly information. Comment on any similarities and differences in your calculation.

DuPont System and the Compound Leverage Factor

Using the five ratio Dupont equation, calculate the tax burden, interest burden, operating profit margin, total asset turnover and leverage ratio for one company, e.g., BCE Inc. (BCE), over the past four years using the most recent annual financial statements. How has the compound leverage factor affected the company over this time period?

Notes:

1. Click on “Company” in the Market Insight home page to access the ticker box.
2. Enter the ticker into the ticker box. Note that these tickers correspond to the listing in the New York Stock Exchange, not the Toronto Stock Exchange.
3. The share prices are given in U.S. dollars, not Canadian dollars.