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 2021 and $5,100 in 2020.

3. On July 1, 2021, 4,000 shares were reacquired for $10 per share and cancelled.

4. In 2021, $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 2021.

Taking It Further

Based on the ratios you have calculated for 2021, can you determine whether The Cable Company?s liquidity, solvency, and profitability are strong or weak? If not, what additional information would you require?

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THE CABLE COMPANY LTD. Income Statement Year Ended December 31 2021 2020 Net sales $1,948,500 $1,700,500 Cost of goods sold 1,025,500 946,000 Gross profit Operating expenses 923,000 754,500 516,000 449,000 Profit from operations Interest expense 407,000 305,500 19,000 28,000 Profit before income tax 379,000 286,500 Income tax expense 113,700 $ 265,300 86,000 $ 200,500 Profit THE CABLE COMPANY LTD. Balance Sheet December 31 Assets 2021 2020 Current assets $ 68,100 $ 64,200 Cash Accounts receivable 107,800 102,800 Inventory 143,000 115,500 Total current assets 318,900 282,500 Property, plant, and equipment 679,300 570,300 Total assets $998,200 $852,800 Liabilities and Shareholders' Equity Current liabilities Accounts payable Income tax payable Current portion of mortgage payable $155,000 $125,400 43,500 42,000 20,000 10,000 Total current liabilities 208,500 187,400 Mortgage payable 104,000 200,000 Total liabilities 312,500 387,400 Shareholders' equity Common shares (56,000 issued in 2021; 60,000 in 2020) Retained earnings 168,000 180,000 517,700 285,400 Total shareholders' equity 685,700 465,400 Total liabilities and shareholders' equity $998,200 $852,800