Reference no: EM131822280

Problem 18-4A Financial information for Messersmith Company is presented below.

MESSERSMITH COMPANY Balance Sheets December 31
Assets	2017		2016
Cash	mce_markernbsp;78,400	mce_markernbsp;72,800
Short-term investments	58,240	44,800
Accounts receivable (net)	109,760	89,600
Inventory	140,000	151,200
Prepaid expenses	32,480	25,760
Land	145,600	145,600
Building and equipment (net)	201,600	196,000
$766,080	$725,760
Liabilities and Stockholders' Equity
Notes payable	$112,000	$112,000
Accounts payable	53,760	47,040
Accrued liabilities	56,000	44,800
Bonds payable, due 2020	168,000	168,000
Common stock, $10 par	224,000	224,000
Retained earnings	152,320	129,920
$766,080	$725,760

MESSERSMITH COMPANY Income Statement For the Years Ended December 31
2017			2016
Net sales	$952,000	$884,800
Cost of goods sold	694,400	644,000
Gross profit	257,600	240,800
Operating expenses	209,440	193,760
Net income	mce_markernbsp;48,160	mce_markernbsp;47,040

Additional information:

1. Inventory at the beginning of 2016 was $132,160.
2. Total assets at the beginning of 2016 were $705,600.
3. No common stock transactions occurred during 2016 or 2017.
4. All sales were on account. Accounts receivable, net at the beginning of 2016 were $98,560.
5. Notes payable are classified as current liabilities.

Indicate, by using ratios, the change in liquidity and profitability of Messersmith Company from 2016 to 2017. (Round Earnings per share to 2 decimal places, e.g. 1.65, and all other answers to 1 decimal place, e.g. 6.8 or 6.8% .)

Given below are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2017, and (2) as of December 31, 2018, after giving effect to the situation. Net income for 2018 was $56,000. Total assets on December 31, 2018, were $784,000. (Round answers to 1 decimal place, e.g. 6.8 or 6.8% .)