Connor Ltd, is a large private company owned by the Connor family. It operates a manufacturing business in northern Ontario. It has applied to the ICB bank for a new loan of $100 million to expand its manufacturing facilities. You are a financial analyst with ICB. You have just been given an assignment to analyze Connor's Year 7 financial statements and to identify any concerns about Connor's performance and financial condition. The following are financial statements for Connor Ltd. for Year 7: BALANCE SHEETS (In 000s) Asset Cash Accounts receivable Inventory Property, plant and equipment Liabilities and Shareholders' Equity Accounts payable Other accrued liabilities Bonds payable Common shares Retained earnings Year 7 Year 6 $ 8,000 194,000 $ 24,000 188,000 316,000 303,000 $ 821,000 $ 196,000 63,000 186,000 171,500 204,500 $ 821,000 306,000 256,000 $ 774,000 $ 201,600 52,400 186,000 173,000 161,000 $ 774,000 Gross margin Sales Cost of goods sold Depreciation expense Other expenses Income tax expense Net income INCOME STATEMENT (In 000s) Year 7 $ 1,930,000 (1,356,000) 574,000 (41,000) Year 6 $ 1,880,000 (1,276,000) 604,000 (35,000) (421,000) (402,000) (52,400) (62,160) $ 78,600 $ 85,840 Additional Information Connor uses the straight-line method when depreciating its property, plant, and equipment. Interest expense was $10,000 for Year 6 and Year 7. (a) Convert Connor's financial statements for both Year 7 and Year 6 into common-sized financial statements using: (Input all amounts as positive values. Omit $ sign in your response. Round the final answer to the nearest whole dollar.) (1) Vertical analysis Asset Cash Accounts receivable Inventory BALANCE SHEETS Year 7 Year 6 $ $ Property, plant and equipment $ Liabilities and Shareholders' Equity. Accounts payable $ Other accrued liabilities Bonds payable Common shares Retained earnings $ Sales Cost of goods sold Gross margin Depreciation expense Other expenses Income tax expense Net income INCOME STATEMENT Year 7 Year 6. $ (ii) Horizontal analysis BALANCE SHEETS Year 7 Year 6 Asset Cash Accounts receivable Inventory Property, plant and equipment Liabilities and Shareholders' Equity Accounts payable Other accrued liabilities Bonds payable Common shares Retained earnings A $ $ Sales Cost of goods sold Gross margin Depreciation expense Other expenses Income tax expense Net income INCOME STATEMENT Year 7 Year 6 (b) Identify five financial statement items that seem to be peculiar relative to expectations. (Single click the box with t mark to produce a check mark for a peculiar item and double click the box with the question mark to empty the ba peculiar item.) ? Cash ? Accounts receivable Equipment 7 Accounts payable ? Accrued liabilities Retained earnings Equipment ? Accounts payable ? Accrued liabilities ? Retained earnings ? Sales ?Cost of goods Depreciation expense ? Income tax expense (c) Calculate the current ratio, debt-to-equity ratio, return on assets, and return on equity for both Year 7 and Year 6. (Enter your answers in thousands. For E.g., 1,000,000 should be entered as 1,000. Round the final answers for all the ratios to two decimal places. Omit $ sign in your response.) Current ratio $ Debt to equity Year 7 Return on assets $ $ Return on equity Year 6 $ Return on equity $ % (d) Determine whether Connor's liquidity, solvency, and profitability have improved or deteriorated from Year 6 to Year 7. Liquidity (Click to select) Solvency (Click to select) Profitability (Click to select)