8.1 Estimate the amount of inventories that your company purchased and produced during the current year. (Hint: use the cost of sales equation.)

For the amount of inventories that Loblaw purchased and produced during the current year, we need to find the purchases of the period by using the equation of the cost of sales (BI + P – EI = COS).

In the report, we can find the cost of sales (24 185 million) that we add to the ending inventory (2 007 million) and then we have to subtract the beginning inventory (2025 million).

This equation gives us the total purchases of the period which is 24 167 million.

With the equation of cost of sales,

Cost of sales 24 185

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If so, read the note related to long-term debt, identify one of the bonds or notes and list any special features related to that debt issue (e.g., callable, convertible, secured by specific collateral).

Loblaw Companies Limited Notes: During 2011, a $350 million 6.50% medium term note (“MTN”) due January 19, 2011 matured and was repaid.

11.2 Ratio analysis: What does the times interest earned ratio measures in general?

The times interest earned ratio measures in general how many times the annual interest expenses are covered by the net operating income of the company. In short, it shows the amount of resources generated for each dollar of interest expense. A high ratio is more favourable than a lower ratio, because a high ratio represents an extra margin of protection in case profitability deteriorates.

Compute the ratio for each of the last three year.

2012 (2012 Annual Report)

Times Interest Earned Ratio = (Net Earnings+Interest Expense+Income Tax Expense)/(Interest Expense)

Times Interest Earned Ratio = 650 (p.43) + 332 (p.37) + 215 (p.47) 332