Comparative financial statements for The Cable Company Ltd. are shown below. 

Additional information: 

1. All sales were on account. 

2. The allowance for doubtful accounts was $5,400 in 2024 and $5,100 in 2023. 

3. On July 1, 2024, 4,000 shares were reacquired for $10 per share and cancelled. 

4. In 2024, $5,000 of dividends were paid to the common shareholders. 

5. Cash provided by operating activities was $316,200. 

6. Cash used by investing activities was $161,300. 

Instructions 

Calculate all possible liquidity, solvency, and profitability ratios for 2024.

Based on the ratios you have calculated for 2024, can you determine whether The Cable Company’s liquidity, solvency, and profitability are strong or weak? If not, what additional information would you require?

Transcribed Image Text:

THE CABLE COMPANY LTD. Income Statement Year Ended December 31 Net sales Cost of goods sold Gross profit Operating expenses Profit from operations Interest expense Profit before income tax Income tax expense Profit for the year 2024 $1,948,500 1,025,500 923,000 516,000 407,000 28,000 379,000 113,700 $ 265,300 2023 $1,700,500 946,000 754,500 449,000 305,500 19,000 286,500 86,000 $ 200,500