Comparative financial statements for Track Ltd. are shown below.

Additional information:
1. All sales were on account.
2. The allowance for doubtful accounts was $5,000 in 2014, $4,000 in 2013, and $3,000 in 2012.
3. In each of 2014 and 2013, $15,500 of dividends were paid to the preferred shareholders.
4. Cash provided by operating activities was $133,500 in 2014 and $180,500 in 2013.
5. Cash used by investing activities was $110,000 in 2014 and $56,000 in 2013.
Instructions
(a) Calculate all possible liquidity, solvency, and profitability ratios for 2014 and 2013.
(b) Identify whether the change in each ratio from 2013 to 2014 calculated in (a) was favourable (F), un-favourable (U), or no change (NC).
(c) Explain whether overall
(1) Liquidity,
(2) Solvency, and
(3) Profitability improved, deteriorated, or remained the same between 2013 and 2014.
Taking It Further
Does this problem employ an intra company comparison or an intercompany comparison?
Which do you think is more useful?
Continue to the next page...

TRACK LTD. Income Statement Year Ended December 31 2014 Net sales Cost of goods sold Gross proft Operating expenses Profit from operations Interest expense (net) Profit before income taxes Income tax expense $1,000,000 650,000 350,000 200,000 150,000 35,000 115,000 17,250 $ 97,750 2013 $940,000 635,000 305,000 180,000 125,000 35,000 90,000 13,500 s 76,500 TRACK LTD. Balance Sheet December 31 014 Assets Cash Accounts receivable Inventories Prepaid expenses Long-term debt investments Land Building and equipment 2013 2012 $ 50,000 42,000 $33,000 77,000 150,000 30,000 50,000 75,000 660,000 $1,240,000 $1,135,000 1,075,000 100,000 240,000 25,000 180,000 75,000 87,000 200,000 31,000 100,000 75,000 570,000 600,00 Total assets Liabilities and Shareholders' Equity Liabilities 125,000 125,000 125,000 Notes payable Accounts payable Accrued liabilities Bonds payable, due 2018 $ 125,000 125,000 125,000 71,000 20,000 200,000 416,000 160,750 52,000 100,000 437,750 50,000 100,000 415,000 Total liabilities Shareholders' equity Preferred shares Common shares (100,000 issued) Retained earnings 200,000 300,000 302,250 802,250 $1,240,000 200,000 300,000 220,000 720,000 $1,135,000 200,000 300,000 159,000 659,000 $1,075,000 Total shareholders' equity Total liabilities and shareholders' equity