Comparative financial statements for Click and Clack Ltd. are shown below.

Additional information:
1. Seventy-five percent of the sales were on account.
2. The allowance for doubtful accounts was $4,000 in 2017, $5,000 in 2016, and $3,000 in 2015.
3. In 2017 and 2016, dividends of $3,000 and $8,000, respectively, were paid to the common shareholders.
4. Cash provided by operating activities was $103,500 in 2017 and $129,000 in 2016.
5. Cash used by investing activities was $115,500 in 2017 and $35,000 in 2016.
Instructions
(a) Calculate all possible liquidity, solvency, and profitability ratios for 2017 and 2016.
(b) Identify whether the change in each ratio from 2016 to 2017 calculated in part (a) was favourable (F), unfavourable (U), or no change (NC).
(c) Explain whether overall (1) liquidity, (2) solvency, and (3) profitability improved, deteriorated, or remained the same between 2016 and 2017.
TAKING IT FURTHER
Does this problem employ an intracompany comparison or anintercompany comparison? Which do you think is more useful?

Transcribed Image Text:

CLICK AND CLACK LTD. Income Statement Year Ended December 31 Cost of goods sold Profit from operations Other revenues and expenses Interest expense Profit before income tax Income tax expense 5 CLICK AND CLACK LTD. Balance Sheet December 31 Land, buildings, and equipment 4 Bonds payable, due 2020 3 Total liabilities Shareholders' equity Common shares (20,000 issued) Total shareholders' equity Total liabilities and shareholders' equity