Kawani Corporation has been operating for several years, and on December 31, 2014, presented the following statement of financial position.

Cost of goods sold in 2014 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 2013 and 2014.
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 the company's financial soundness.

Transcribed Image Text:

KAWANI CORPORATION Statement of Financial Position December 31, 2014 $ 40,000 Accounts payable Cash Accounts receivables Inventory Equipment (net) 75,000 95,000 220,000 $430,000 Mortgage payable Common shares (no par) Retained earnings $ 70,000 140,000 160,000 60,000 $430,000