Presented below are the income statement and balance sheet of Windsor, Inc:

Income Statement 2020

Sales $100

Cost of goods sold 40

Gross profit 60

Operating expense 7

Interest expense 4

Taxes 6

Gain on sale of equipment 4

Loss on sale of investment (1)

Total expenses 20

Net income 40

Balance Sheet 2020 2019

Cash $10 $2

Accounts receivable 12 10

Inventory 14 20

Prepaid rent 6 4

Investments 6 10

Equipment 20 15

Accumulated depreciation (8) (6)

Total assets 60 55

Accounts Payable 4 3

Taxes payable 3 10

Bonds payable 8 4

Common stock 32 28

Retained earnings 13 10

Total 60 55 CONTINUED

Additional Information

1. Sold investment that cost $4 for $3.
2. Average shares of stock outstanding was $10.
3. Market price of a share of common stock was $30.
4. Equipment costing $5 with accumulated depreciation of $3 was sold for $6.

Required: Prepare a statement of cash flows using the direct method for 2020.

PROBLEM 2: Using the information from Problem 1, calculate the following ratios for 2020:

1. Current ratio.
2. Inventory turnover
3. Average collection period.
4. Times interest earned.
5. Debt to equity ratio.
6. Price earnings ratio.
7. Return on equity.