Kawani Corporation has been operating for several years. On December 31, 2017, it presented the following statement of financial position.

Cost of goods sold in 2017 was $420,000, operating expenses were $51,000, and net income was $27,000. Accounts payable suppliers provided operating goods and services. Assume that total assets are the same in 2016 and 2017.
Instructions
Calculate each of the following ratios:
(a) Current ratio
(b) Acid-test ratio
(c) Debt to total assets ratio
(d) Rate of return on assets
(e) Days payables outstanding
For each ratio, also indicate how it is calculated and what its significance is as a tool for analyzing Kawani's financial position, profitability, and liquidity.

Transcribed Image Text:

KAWANI CORPORATION Statement of Financial Position December 31, 2017 Cash Accounts receivable (net) Inventory Equipment (net) $40,000 75,000 95,000 220,000 $430,000 Accounts payable Mortgage payable Common shares Retained earnings $ 70,000 140,000 160,000 60,000 $430,000