INCOM CORPORATION Comparative Balance Sheet December 31 2017 2016 2015 $ $ Assets Cash Prepaid Expenses Accounts receivable Inventory Long-term investment Property, plant and equipment (net) Total Assets 75,000 8,000 62,000 150,000 120,000 180,000 595,000 66,000 13,000 30,000 111,000 120,000 225,000 565,000 75,000 35,000 25,000 110,000 210,000 455,000 $ $ $ $ $ 62,000 Liabilities and shareholders' equity Accounts payable Short-term notes payable Bonds payable Common shares (400,000 shares outstanding) Retained eamings Total liabilities and shareholders' equity 80,000 60,000 115,000 190,000 150,000 $ 595,000 65,000 60,000 155,000 170,000 115,000 565,000 160,000 145,000 88,000 455,000 $ $ INCOM CORPORATION Income Statement Years Ended December 31 2017 $ 424,000 2016 $ 350,000 Net sales Expenses Cost of goods sold Depreciation expense Operating expenses Total expenses Income from operations 188,000 42,000 62,000 292,000 132,000 175,000 40,000 45,000 260,000 90,000 32,000 Other items Interest expense Gain from sale of land Total Income before income taxes 29,000 8,000 21,000 111,000 32,000 58,000 Income tax expense Net income 31,000 80,000 20,000 38,000 $ $ QUESTION 5 (10 marks) Refer to the financial statements of Incom Corporation at the end of the exam. All sales of the company were credit sales. REQUIRED Using ratio analysis, review the financial condition of the company for the two years of 2017 and 2016 as follows: a Assess the liquidity (ability to pay current liabilities) of Incom by calculating two ratios that are measures of liquidity (exclude inventory and accounts receivable ratios see d below). b. Assess the profitability of Incom by calculating two ratios that are measures of profitability. C. Assess the solvency of Incom by calculating two ratios that are measures of solvency. d Assess the efficiency of Incom's inventory and accounts receivable by calculating two ratios (one for inventory and one for accounts receivable) that are measures of their efficiency. e. Overall, what can you conclude about the performance of Incom over the two years of 2016 and 2017