Kawani Corporation has been operating for several years. On December 31, 2023, it presented the following SFP.

Cost of goods sold in 2023 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 2022 and 2023.

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:

Cash Accounts receivable (net) Inventory Equipment (net) Kawani Corporation Statement of Financial Position December 31, 2023 $ 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