The financial statements of Mackay Corporation show the following information:

Instructions

a. Using horizontal analysis, analyze Mackay’s change in liquidity, solvency, and profitability in 2023. Round to one decimal place.

b. Using vertical analysis, analyze Mackay’s decline in net income in 2023. Round to one decimal place.

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, 2023 Assets Cash Accounts receivable FV-NI investments Inventory Plant assets (net) Intangible assets Liabilities and Equity Accounts payable Long-term debt Share capital Retained earnings 2023 $ 285,000 142,000 133,000 355,000 442,000 113,000 $1,470,000 $ 267,000 64,000 326,000 813,000 $1,470,000 2022 $ 292,000 181,000 132,000 401,000 465,000 143,000 $1,614,000 $ 337,000 152,000 326,000 799,000 $1,614,000