Financial information for Star Track Company is presented here:

Additional information:1. Inventory at the beginning of 1997 was \(\$ 350,000\)2. Receivables at the beginning of 1997 were \(\$ 80,000\).3. Total assets at the beginning of 1997 were \(\$ 1,175,000\).4. No common stock transactions occurred during 1997 or 1998.5. All sales were on account.Instructions

(a) Indicate, by using ratios, the change in liquidity and profitability of Star Track Com-pany from 1997 to 1998. [Note: Not all profitability ratios can be computed nor cancash-basis ratios be computed.]

(b) Given below are three independent situations and a ratio that may be affected. Foreach situation, compute the affected ratio (1) as of December 31, 1998, and (2) as ofDecember 31, 1999, after giving effect to the situation. Net income for 1999 was\(\$ 125,000\). Total assets on December 31,1999 , were \(\$ 1,500,000\)

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Assets Cash Short-term investments Receivables (net) Inventories Prepaid expenses Land STAR TRACK COMPANY Balance Sheet December 31 Building and equipment (net) Total assets Liabilities and Stockholders' Equity 1998 1997 $ 50,000 80,000 $ 42,000 100,000 100,000 87,000 440,000 400,000 25,000 31,000 75,000 75,000 570,000 500,000 $1,340,000 $1,235,000 Notes payable $ 125,000 $ 125,000 Accounts payable 160,000 Accrued liabilities 50,000 140,000 50,000 Bonds payable, due 2000 200,000 200,000 Common stock, $5 par 500,000 500,000 Retained earnings 305,000 220,000 Total liabilities and stockholders' equity $1,340,000 $1,235,000