Kawani Corporation has been operating for several years. On December 31, 2020, it presented the following SFP. 

Cost of goods sold in 2020 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 2019 and 2020. 

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 (include cost of goods sold and operating expenses) 

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, 2020 Cash $ 40,000 Accounts payable $ 70,000 Accounts receivable (net) 75,000 Mortgage payable 140,000 Inventory 95,000 Common shares 160,000 Equipment (net) 220,000 Retained earnings 60,000 $430,000 $430,000