It is January 1, 2018. You are a Senior Analyst at Canada Hardware Inc. (CHI), one of the top hardware, sports, and apparel providers in Canada with hundreds of stores across Canada. The CEO of Canada Hardware, Tony Stark, has reached out to you to draft a report.
Purpose
You will review and analyze the mission statement, case information, and financial statements of Canada Hardware Inc. You will use the information from your review to develop a SWOT analysis with the purpose of seeking support for proposed investment projects. You will also prepare a notional UCC asset tax values continuity schedule to analyze the impact of capital equipment disposals.
How to Proceed
Prepare your preliminary business case report by analyzing financial and non-financial data from the case information provided below. You will need to undertake and include the following:
- Create a title page with your author identification (Full Name, Student ID).
- Review the information and financial statements included below to gain an understanding of potential investment initiatives that would be supportable by management. Describe the intent of the mission statement from the annual report, and prepare a SWOT analysis (strengths, weaknesses, opportunities, threats). Based on you SWOT analysis, assess and explain in detail if Canada Hardware is currently delivering on its mission statement.
- Conduct financial statement analysis using liquidity ratios, debt ratios, profitability, and asset utilization ratios (at least three for each type of ratio). Comment on each of the ratios and what they say about the company’s performance over the last 5 years.
- Prepare an assessment for each of the investment proposals included below, with rationale that is aligned with the SWOT analysis and financial statement ratio analysis. Recommend if CHI should go forward with any of the proposed investments based on this analysis.
- Prepare a basic income statement forecast for the subsequent fiscal year, using a percentage of sales approach and using information included in the materials below to support assumptions that correspond for each revenue and expense. Each line item (e.g., marketing expenses) should have a note and an explanation on how it was calculated.
- The CEO also needs help understanding the tax consequences of the disposal for an old piece of equipment. Prepare a CCA schedule for tax depreciation of a set of equipment purchased three years ago on January 1, 2015 for $270,000 (assume Class 46 with CCA rate of 30% and half-year rule applying). Calculate the tax consequence if all the equipment were to be sold at the beginning of this year (i.e., end of 2017) for either $90,000 or $120,000. The equipment is the only asset in the class. Utilize the average tax rate that Canada Hardware Inc. had in the last five years in your analysis of the tax impact.
Sample Solution
