Given the information presented on Sheet 1, a) Calculate the liquidity ratios for the year ended at Dec. 31, 2016. Show calculations following the table. b) Identify factors that limit the usefulness of ratio analysis.

Rainbow Paint Co.'s comparative financial statements for the years ending December 31, 2016 and 2015, are as follows. The market price of Rainbow Paint Co.'s common stock was $25 on December 31, 2016, and $30 on December 31, 2015. Rain Paint Co. Comparative Income Statement For the Years Ended December 31, 2016 and 2015 2016 Sales 5,000,000 Cost of goods sold 3,400,000 Gross Profit 1,600,000 Selling expenses 650,000 Administrative expenses 325,000 Total operating expenses 975,000 Income from operations 625,000 Other income 25,000 650,000 Other expense (interest) 105,000 Income before income tax 545,000 Income tax expense 300,000 Net income 245,000 Rain Paint Co. Comparative Retainined Earnings Statement For the Years Ended December 31, 2016 and 2015 2016 Retained earnings, January 1 723,000 Add net income for year 245,000 Total 968,000 Deduct dividends: On preferred stock 40,000 On common stock 45,000 Total 85,000 Retained earnings, December 31 883,000 2015 3,200,000 2,080,000 1,120,000 464,000 224,000 688,000 432,000 19,200 451,200 64,000 387,200 176,000 211,200 2015 581,800 211,200 793,000 40,000 30,000 70,000 723,000 Rain Paint Co. Comparative Balance Sheet December 31, 2016 and 2015 Dec. 31, 2016 Dec. 31, 2015 Assets Current assets: Cash Temporary investments Accounts receivable (net) Inventories Prepaid expenses Total current assets Long-term investments Property, plant, and equipment (net) Total assets 175,000 150,000 425,000 720,000 30,000 1,500,000 250,000 2,093,000 3,843,000 125,000 50,000 325,000 480,000 20,000 1,000,000 225,000 1,948,000 3,173,000 Liabilities Current liabilites Long-term liabilites: Mortgage note payable, 10%, due 2017 Bonds payable, 8%, due 2020 Total long-term liabilities Total liabilities 750,000 650,000 410,000 800,000 1,210,000 1,960,000 800,000 800,000 1,450,000 Stockholders' Equity Preferred 8% stock, $100 par Common stock, $10 par Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 500,000 500,000 883,000 1,883,000 3,843,000 500,000 500,000 723,000 1,723,000 3,173,000 Name: Student ID: Given the information presented on Sheet 1, a) Calculate the liquidity ratios for the year ended at Dec. 31, 2016. Show calculations following the table. b) Identify factors that limit the usefulness of ratio analysis. Rain Paint (1) Liquidity ratios Current Quick (2) Solvency Interest coverage (3) Profitability ROA ROE