The financial statements of Mackay Corporation show the following information:

Instructions
(a) Using horizontal analysis, analyze Mackay Corporation's change in liquidity, solvency, and profitability in 2014.
(b) Using vertical analysis, analyze Mackay Corporation's decline in net income in 2014.
(c) Referring to the CICA research study mentioned in this chapter, 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, 2014 Assets Cash Accounts receivable Investments -fair value through net income Inventory Plant assets (net) Intangible assets 2014 2013 $ 285,000 142,000 133,000 355,000 442,000 113,000 $1,470,000 $292,000 181,000 132,000 401,000 465,000 143,000 $1,614,000 Liabilities and Equity Accounts payable Long-term debt Share capital Retained earnings $ 267,000 64,000 326,000 813,000 $1,470,000 $337,000 152,000 326,000 799,000 $1,614,000 MACKAY CORPORATION Income Statement Year Ended December 31, 2014 2014 2013 Net sales Cost of goods sold Gross profit Selling, general, and administrative expenses Other expenses, net Income before income tax Income tax Net income $ 805,000 527,000 278,000 140,000 118,000 20,000 6,000 $14,000 $781,000 530,000 251,000 111,000 110,000 30,000 9,000 $ 21,000