The financial statements of Mackay Corporation show the following information:

Instructions:

For each of the above events, indicate whether the company should

a) Using horizontal analysis, analyze Mackay Corporation’s change in liquidity, solvency, and profitability in 2017."                        

b) Using vertical analysis, analyze Mackay Corporation’s decline in net income in 2017.                        

c) Which profitability ratios are obtained from the vertical analysis performed in part (b)? Is profitability improving or deteriorating based on these ratios?  

d) Referring to the research study mentioned in this chapter (in the section “Limitations of Financial Statement Analysis”), discuss some limitations of the financial statement analysis done in parts (a) and (b)."            

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Mackay Corporation Statement of Financial Position December 31, 2017 Assets Cash Accounts Receivable Fair value through net income investments Invent Plant assets (net) Intangible assets 2017 2016 $285,000 S292,000 142,000181,000 33,000 132,000 355,000401,000 442.000 465.000 113.000 143.000 $1,470,000 S1,614,000 Liabilities and Equity Accounts payable Long-term debt Share capital Retained earnings 2017 2016 $267,000 S337,000 64.000 326,000326,000 813.000 799,000 152,000 $1,470,000 S1,614,000 Mackay Corporatioin Income Statement Year Ended December 31,2017 2017 2016 Net sales Cost of goods sold Gross profit Selling, general, and administrative expense Other expenses, net Income before tax Income tax Net Income $805,000 $781,000 527.000 530,000 278,000251,000 140,000111,000 118,000 20,000 110,000 30,000 9.000 S21.000 6.000 $14.000