Comparison of Canadian Pacific Railway and Canadian National Railway

3440 words 14 pages
Table of Contents
1. Introduction
• Background – History and Overview of Industry
• History and Overview of Canadian Pacific Railway
• History and Overview of Canadian National Railway

2. GAAP methods validation 3. Financial Analysis
• Canadian Pacific Railway
• Canadian National Railway

4. Comparison of Canadian Pacific Railway and Canadian National Railway through Ratio Analysis
• Gross margin
• Net income margin,
• Return on assets
• Return on equity
• P/E Ratio

5. Recommendation
6. Appendices
• Income statements
• Balance sheet
• Cash flow Statement
1. Introduction
A. Railway Industry in North America
Rail industry is profitable and growing industry. In North America, five companies are dominant and
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Both the external auditors are using GAAP method (US and Canada)
B. The Canadian National Railway Company
KPMG LLP is company’s external auditor since 1992. It has audited the financial reports of CNR. CNR’S consolidated financial statements are prepared according to Canadian generally accepted accounting principles (GAAP). Moreover, the auditors also prepared the statements in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Summery- CNR and CPR are proved to be presenting financial statements in accordance with GAAP and thus, we can infer that these statements can be accurately compared and the GAAP methods are validated.

3. Financial analysis
A. Canadian Pacific Railway
a. Income statement of CPR
1). Sales
The sales of CP in 2011 were $5,052M which was about $197M increase in sales in 2010. Sales for 2007, 2008 and 2009 are $4,555.2M,$ 4,814.8M and $4,279.8M respectively. Assuming 2006 as a base year, CP experienced a gradual growth in sales except for recession year 2009, where, it has -3.33% decrease in sales. The sales for 2011 are 14.11% of sales in 2006. This shows that CP recovered from recession well and quickly.
2) Gross profit
The gross profit of CP is increasing since 2006 and it increased by 120% up to 2011.
In 2009, because of recession, gross profit went down and was 98% of that of 2006.But CP dealt with recession well enough and recovered fast