Kawani Corporation has been operating for several years and on
Kawani Corporation has been operating for several years, and on December 31, 2011, presented the following balance sheet.
Cost of goods sold in 2011 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 2010 and 2011.
Calculate each of the following ratios. For each ratio, also indicate how it is calculated and what its significance is as a tool for analyzing the company’s financial soundness.
(a) Current ratio
(b) Acid-test ratio
(c) Debt-to-total-assets ratio
(d) Rate of return on assets
(e) Days payables outstanding
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