AP12-15A The following information comes from the accounting records of Hercep Ltd. for the first three years of its existence: 2018 2019 2020 Statement of Financial Position Assets Cash $ 22,500 $20,000 $25,000 Accounts receivable 67,500 50,000 145,000 Inventory 110,000 130,000 220,000 Capital assets (net) 430,000 450,000 500,000 Other assets 232,000 210.000 266.400 $862,000 $860,000 $1,156,400 Liabilities and equity Accounts payable $100,000 $50,000 $100,000 Long-term debt 200,000 250,000 500,000 Common shares 525,000 525,000 525,000 Retained earnings 37.000 35,000 31,400 $862,000 $860,000 $1,156,400 Statement of Earnings Sales $700,000 $800,000 $900,000 Cost of goods sold (420,000) (540,000) (630,000) Other expenses (170.000 (220.000 (218.000 110,000 40,000 52,000 Income tax (33,000) (12.000) (15,600) Net income $ 77,000 $28,000 $ 36,400 Required a. Based on above information, analyze and comment on the changes in the company's profitability and liquidity, in addition to the management of accounts receivable and inventory from 2018 to 2020. b. Based on the above information, analyze and comment on the company's use of leverage from 2018 to 2020