Cp and Cn

QUALITATIVE STUDY

The following comparative analysis is based on the annual financial statements from CN and CP ranging from 2007 to 2011. All statements (balance sheet, income statement, and cash flow statement) conform to generally accepted accounting principles (GAAP), and have been audited by external and independent firms such as KPMG and PricewaterhouseCoopers to ensure compliance.

Activity Analysis

| Receivables Turnover |

| 2007 | 2008 | 2009 | 2010 | 2011 |

CN | 14.9 | 13.2 | 8.6 | 10.6 | 11.3 |

CP | 8.13 | 8.3 | 8.1 | 11.1 | 10.6 |

CN had a relatively high turnover of 14.9 in 2007; however, the turnover was affected by the economic recession and the rates dropped in 2008 and 2009, reaching the lowest ratio of 8.6 in the past five years. During 2010 and 2011 CN started recovering from this decline and it was able to increase the turnover by 2.0 and 0.7 points in 2010 and 2011 respectively year over year. Still, at the end of 2011 the receivables turnover was 3.6 points below the base year.

CP on the other hand had low receivables turnover rates in 2007 and progressively improved the ratio. The economic recession had no evident impact on the turnover; however, it can probably explain why it took CP longer to recover from the low ratio it had in 2007. In 2010 CP improved collections and reached 11.1. In 2011 the receivable turnover decreased to 10.6 points, a decrease of 0.5 points; however, this performance was still a major improvement from 2007, having achieved a net increase of 2.47 points.

Both companies showed the capacity to improve collections after the original effects of the recession. However since CN had higher ratios each year, we can say they have better collection capacity than CP. In 2011, CN still had a better receivable turnover than CP, although the difference was not significant. Initially, CP’s ratio was 6.7 points below CN’s and by 2011 the gap was reduced to only 0.7 points below.

| Fixed Asset Turnover |...