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2009 midterm.doc

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Management Core
MGCR 211
Sebastien Breau

NAME ( last)___BORDEN___________, (first)__SOLUTION________________ STUDENT #:______________________________ CIRCLE SECTION 001 002 McGill University Faculty of Management Introduction to Financial Accounting MGCR 211 Mid-Term Examination Lecturer: Karen Zajdman-Borden Date: February 20, 2009 Time: 9:00am 11:00am Instructions: This is a closed book exam. You are allowed dictionaries. Only non-text storing calculators are allowed This exam consists of 4 questions and a total of 20 pages. All Questions are to be answered on this examination paper. The space allocated to answer must be respected. Elements of an answer outside of the allocated space may be disregarded. Show your calculations and explain your reasoning. You must return this examination. Question Marks available Grade 1 40 2 18 3 24 4 18 Total 100 1 Question 1 (40marks 48 minutes) Below you will find the financial statements of BCE inc. for the year ended December 31, 2007. BCE is Canadas largest communication company. Bell, the core business operation, provides the nations leading provider of wireline and wireless communications services, internet access, data services and video services to residential, business and wholesale customers. 2 Question 1 (40 marks 48 minutes) 3 Question 1 (40 marks 48 minutes) Part 1 You are a partner of the accounting firm of Borden & Wineman, you have been asked by a client for your advice on whether or not he should invest in shares of BCE. Inc.. You are to help him investigate further on the potential investment in BCE inc. He has provided you with the ratios for the industry average in the chart below. Current ratio 1.1 to 1 Return on assets 6 % Return on Equity 12 % Days to Collect A/R 30 days Days Inventory 30 days Debt /Equity I 60% Times Interest Earned 3 times EPS N/A Required: Based on your analysis, comment on the financial health of BCE, highlight the areas you are analyzing. Using the ratios that are mentioned in the chart above, advise your client whether or not he should invest in BCE Inc. (32 marks) 4
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