Entête de question

Robert Groff, an equity analyst, is preparing a report on Crux Corp. As part of his report, Groff makes a comparative financial analysis between Crux and its two main competitors, Rolby Corp. and Mikko Inc. Crux and Mikko report under US GAAP and Rolby reports under IFRS.

Groff gathers information on Crux, Rolby, and Mikko. The relevant financial information on the three companies, and on the industry, is provided in Exhibit 1.

Exhibit 1: Selected Financial Information (millions of US dollars)
A. Balance Sheets and Income Statements
	Crux	Rolby	Mikko
Inventory valuation method	LIFO	FIFO	LIFO
From the Balance Sheets
As of 31 December 2018
Inventory, gross	480	620	510
Valuation allowance	20	25	14
Inventory, net	460	595	496
Total debt	1,122	850	732
Total shareholders’ equity	2,543	2,403	2,091
As of 31 December 2017
Inventory, gross	465	602	401
Valuation allowance	23	15	12
Inventory, net	442	587	389
From the Income Statements
Year Ended 31 December 2018
Revenues	4,609	5,442	3,503
Cost of goods sold^a	3,120	3,782	2,550
Net income	229	327	205
^aCharges included in cost of goods sold for inventory write-downs*	13	15	15
B. LIFO Reserve
LIFO Reserve
As of 31 December 2018	55	0	77
As of 31 December 2017	72	0	50
As of 31 December 2016	96	0	43
Tax Rate
Effective tax rate	30%	30%	30%
C. Industry Information
	2018	2017	2016
Raw materials price index	112	105	100
Finished goods price index	114	106	100

*This does not match the change in the inventory valuation allowance because the valuation allowance is reduced to reflect the valuation allowance attached to items sold and increased for additional necessary write-downs.

To compare the financial performance of the three companies, Groff decides to convert LIFO figures into FIFO figures, and adjust figures to assume no valuation allowance is recognized by any company.

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