Following is a comparative balance sheet for Barking Shark International Corporation:Barking Shark ...

Requirement
a.
   Barking Shark International Corporation
   Balance Sheet
   December 31, 2014 and 2013
         % Increase
   2014   2013   (Decrease)
Current assets
Cash   $10,000   $5,000   100.0%
Short-term investments   7,000   10,000   (30.0%)
Accounts receivable, net   30,000   23,000   30.4%
Inventory   37,000   35,000   5.7%
Prepaid expenses   4,000   3,000   33.3%
Total current assets   $88,000   $76,000   15.8%

Property, plant, and equipment, net   33,300   35,000   (4.9%)
Other assets   27,000   22,500   20.0%
Total assets   $148,300   $133,500   11.1%

Current liabilities
Short-term borrowings   $28,400   $13,900   104.3%
Accounts payable   20,000   22,500   (11.1%)
Total current liabilities   $48,400   $36,400   33.0%

Non-current debt   37,500   33,000   13.6%
Total liabilities   $85,900   $69,400   23.8%

Shareholders' equity
Common shares, no par   $20,000   $20,000   0.0%
Retained earnings   42,400   44,100   (3.9%)
Total shareholders' equity   $62,400   $64,100   (2.7%)
Total liab. and shareholders' equity   $148,300   $133,500   11.1%

b. Students' answers will vary, but they should include some or all of the following:
1. While current assets have increased by 15.8%, current liabilities have increased by 33.0%. Thus, the company's short-term liquidity position has declined.
2. At the same time that short-term liquidity has worsened, non-current debt has increased by 13.6%. Because this may have been used to help finance the increase in other assets, it is not necessarily a bad sign, but it should still be investigated.
3. Retained earnings have decreased by only 3.9%. When combined with the possibility of a worsening debt situation, the company appears to be going in the wrong direction.
The percentage changes only indicate areas of concern. They do not prove that good or bad things are happening, but only indicate things that should be investigated.