Chapter 6 (10.

5 points)
6.1 Assume that all sales are on credit, how much cash did the company collect from customers
during the most recent fiscal year?
The company collected $4.28 billion from customers during the most recent fiscal year.
(PAGE 37 , annual report 2022)

6.2 Ratio analysis:

a. What do the receivables turnover ratio and the average collection period measure in general?
The accounts receivable turnover ratio is a metric used in business accounting to assess how well
companies manage the credit they extend to their customers by determining how long it takes to
collect the outstanding debt over the course of the accounting period.

b. If the company lists receivables, compute the receivables turnover ratio and the average collection
period for the past three years.
Saputo Inc. does not have accounts receivables from any individual customer.
“There are no accounts receivable from any individual customer that exceeded 10% of the total
balance of accounts receivable as at March 31, 2022. We regularly review the allowance for expected
credit loss and accounts receivable due. We update our estimate of the allowance for doubtful
accounts based on the evaluation of the recoverability of accounts receivable balances of each
customer taking into consideration historic collection trends of past due accounts”
(Page 58, Annual report)

c. What do your results suggest about the company?

My results suggest that Saputo Inc. is very cautious about their credit risk that they update it regularly
to keep everything running smoothly and when it comes to their customers and that they do not let
any of their customer have an account receivable that exceeds 10 percent to protect their credit
valuation.

6.3 If the company lists receivables, determine what additional disclosure is available concerning the
allowance for doubtful accounts. If the necessary information is provided, prepare the journal entry to
record the bad debt expense for the last fiscal year. Did the recognition of bad debt expense change
(increase or decrease) the receivables turnover ratio? Explain. If the necessary information is not
provided, why might this be so?

Some businesses are paid in advance, so they do not require accounts receivable. When an invoice is
initiated and sent to a customer, the company does not record an accounts receivable; instead, the
company enters a liability, such as "unearned revenue" or "prepaid revenue”

6.4 Did the change in accounts receivable increase or decrease cash flows from operating activities for
the last fiscal year? Explain your answer and identify the direction and amount of the change.
Yes it has decreased cash flows from operating activities from the last fiscal year by 385 million
dollars.
“The decrease was also due to a decrease related to changes in non-cash operating working capital
items of $19 million, driven by the fluctuations in accounts receivable, inventories, and accounts
payable in line with the fluctuation of market prices as well as the timing of collections of accounts
receivable and of payments of accounts payable.”
(PAGE 46, Annual report 2022)

Chapter 7 (8 points)
7.1 Estimate the amount of inventories that the company purchased and produced during the current
year. (Hint: use the cost of sales equation.)
Cost of sales:Beginning inventory+Purchases-Ending inventory=

7.2 What inventory costing method does the company use? What do you think motivated this choice?
They use the FIFO method of costing their inventory.
“Finished goods, raw materials, and work in process are valued at the lower of cost and net realisable
value, cost being determined using the first in, first out method.”
There are lot of factors that depend on the costing method of their inventory such as variations in
market selling prices for dairy products and ingredients, changes in consumer demand, seasonality,
spoilage, limited product shelf life, changes in consumer tastes with respect to our products, and other
factors.
(Page 79, Annual report) and (Page 58, Annual report)
7.3 Ratio analysis:
a. What do the inventory turnover ratio and the average days to sell inventory measure in general?
Inventory turnover is calculated by dividing a company's cost of sales, or cost of goods sold (COGS),
by the average value of its inventory over the same time period. For retailers, this efficiency ratio is
especially important.

b. If the company reports inventories, compute these two measures for the past three years. If the
company does not report the cost of sales (COS) separately, assume that COS equal 70 per cent of the
sales amount.
It does not so we’ll assume it’s equal to 70 % of the sales amount which is 10.52 billion dollars

c. What do your results suggest about the company?

The results suggest that the company has a very complex system of sales that has different sectors in
each country they sell in.

7.4 Did the change in inventories increase or decrease cash flows from operating activities for the last
fiscal year? Explain your answer and identify the direction and amount of the change.
Yes it has decreased cash flows from operating activities from the last fiscal year by 385 million
dollars.
“The decrease was also due to a decrease related to changes in non-cash operating working capital
items of $19 million, driven by the fluctuations in accounts receivable, inventories, and accounts
payable in line with the fluctuation of market prices as well as the timing of collections of accounts
receivable and of payments of accounts payable.”
(PAGE 46, Annual report 2022)

Chapter 8 (9.5 points)

8.1 List the accounts and carrying amounts of the company’s long-lived assets (land, buildings,
equipment, intangible assets, goodwill and others). Refer to the notes for details of property, plant,
and equipment (fixed assets). What is the percentage of each asset to total assets?
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8.2 What cost allocation (depreciation/amortization) method(s) and estimates (useful lives or
depreciation/amortization rates) does the company use for each type of long-lived asset?
8.3 What was the amount of depreciation expense? What was the amount of amortization expense, if
any? Where did you find this information?

8.4 Ratio analysis:

a. What does the fixed asset turnover ratio measure in general?
b. Compute the ratio for the past three years.
c. What do your results suggest about the company?

8.5 What was the effect of depreciation/amortization expense on cash flows from operating
activities?
The effect was decreasing cash flows from operating activities and decreased net earnings in the fiscal
year of 2022.
”In fiscal 2022, net cash generated from operating activities amounted to $693 million, in comparison
to $1.078 billion
for last fiscal year. This decrease of $385 million was mainly due to a decrease in adjusted EBITDA1
of $316 million and an increase in non-cash foreign exchange gain on debt of $66 million.”
(Page 46, Annual report)

8.6 Refer to the statement of cash flows and identify the capital expenditures that the company made
over the past two years.
The capital expenditures that the company made from the last two years are:
498 millions in 2022,434 millions in 2021 and 576 millions in 2020
8.7 Did the company sell any long-lived assets during the past two years? If so, how much cash did
the company receive for selling these assets?