1. a. Calculate the difference between cash flow from operations and net income for each company for 2009 and 2010. For example, if the net income (loss) was ($3) and cash flow from operations was $12, the difference would be $15.
b. Identify five different adjustments on the statement of cash flow (SCF) of ProMetic Life Sciences Inc. that have QOE implications, and explain their significance. You will have to refer to the financial statement notes, especially the accounting policy information, and/or the MD&A, to assess the nature of these items. Items chosen can be transactions or events (for example, the presence of business acquisitions) or accounting policies (for example, revenue recognition issues) but may not be ratios. High-quality answers will be detailed and specific.
These 2010 financial statements comply with Canadian GAAP because they were created before the 2011 IFRS deadline. Do not analyze the nature of differences between Canadian GAAP and IFRS in your solution.
c. Analyze your comparator company and explain and evaluate similar adjustments, if any exist. Complete the grid in Exhibit 2 of the solution template for each item.
d. Conclude with your assessment of the relative quality of earnings for ProMetic Life Sciences Inc. and its comparator company, based on your (limited) examination.
2. Supply the statement of cash flow (SCF) of your comparator company in Exhibit 3 of the solution.
Procedure:
a. Open the financial statements of your comparator company and go to the SCF.
b. Left click and hold the button down; move the mouse to highlight the entire SCF content. Hold down the "CRTL" key and then hit the "C" key.
c. Return to your solution Word document and press "CRTL" and the "V" key. This will copy the material with no spacing, which is acceptable for this submission.
3. Comment on your choice of comparator company. First, evaluate and contrast the two companies. What justification do you have for the choice you made? Then, comment on the difficulties you experienced in identifying a comparator company. Provide one or two paragraphs explaining these points in Exhibit 1 of the solution template.