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Question 1 [25 points) Use Allarco Inc.'s financial statements to compute the required ratios below, and indicate whether the change from year to year is favourable or unfavourable. For your analysis, assume that all other things have remained constant. Apply your analysis in very general terms All values should be accurate to at least two decimal places. Alarco Inc Income Statement For Years Ended December 31, 2014, 2013, and 2012 2014 2013 2012 Sales $919,600 $888,900 $805,600 Cost of goods sold 529,000 546,500 467,400 Gross profit from sales 390,600 342,400 338,200 Operating expenses 119,200 140,400 157,600 Income from operations 271,400 202,000 180,600 Interest expense 6,450 7,850 8,050 Income before taxos 264,950 194,150 172,550 Income taxes 26,800 24,500 25,600 Not income $238,150 $169,650 $146,950 Allarco Inc. Balance Sheet December 31, 2014, 2013, and 2012 Assets 2014 2013 2012 Cash $10,900 $9,600 $11,500 Short-term investments 80,000 70,000 63,000 Accounts receivable, net 67,800 60,300 57,800 Merchandise inventory 41,000 41,400 40,800 Prepaid expenses 8,200 7,000 7,700 Notes receivable, due in 2017 7,000 9,000 8,500 Plant assets, net 243,000 242,000 243,000 Total assets $457,900 $439,300 $432,300 Liabilities and Equity Accounts payable $61,100 $56,700 $48,400 Salaries payable 4,200 3,900 3,300 Income taxes payable 27,300 24,400 20,500 Long-term note payable secured by mortgage on plant assets 92,000 83,000 74,000 Share capital, 100,000 shares 210,000 270,000 280,000 Retained earnings 63,300 1,300 6,100 Total liabilities and equity $457,900 $439,300 $432,300 2014 2013 Ratio Gross profit ratio (%) Net profit ratio (%) Return on equity (%) Times interest earned ratio Return on total assets (%) Analysis (select one) (select one) (select one) (select one) (select one) Analysis (select one) (select one) e)" favourable b) unfavourable equal )