Case 2 (3 Marks) Selected information from the comparative financial statements of the Hamdan Company for the years ended December 31, 2020 and 2019 appear below:

	2020	2019
Cash	40,000	25,000
Accounts receivable (net)	340,000	450,000
Inventory	280,000	320,000
Prepaid insurance	12,000	15,000
Total Current Assets	672,000	810,000
Non-Current Assets	280,000	360,000
Total assets	952,000	1,170,000
Accounts payable	100,000	250,000
Wages payable	50,000	140,000
Total Current liabilities	150,000	390,000
Binds payable	400,000	400,000
Total Liabilities	550,000	790,000
Stockholders Equity
Equity (Common stock)	300,000	300,000
Retained earnings	102,000	80,000
Total Stockholders Equity	402,000	380,000
Total Liabilities and Stockholders Equity	952,000	1,170,000
Selected Income Statement information
Sales Net	880,000	940,000
Cost of goods sold	690,000	720,000
Net income	42,000	55,000

Required:

Compute the following ratios for 2020 and 2019. Show your calculations.

Ratio	Formula	Ratio 2020	Ratio 2019
1. Current ratio	Current Assets / Current liabilities
2. Quick ratio	Current assets inventory / current liabilities
3. Accounts receivable turnover	Sales / Average A/R
4. Days sales outstanding	365 / A/R turnover
5. Inventory turnover	CGS / Average Inventory
6. Days inventory on hand	365 / Inventory turnover
7. Debt to equity	Total Liabilities / Total equity
8. Debt to total assets	Total Liabilities / Total assets
9. Profit margin ratio	Net income / sales
10. Return on total assets	Net income / total assets

Formulas and calculations

Answer

	2020	2019
Current Assets / Current liabilities
Current assets inventory / current liabilities
Sales / Average A/R
365 / A/R turnover
CGS / Average Inventory
365 / Inventory turnover
Total Liabilities / Total equity
Total Liabilities / Total assets
Net income / sales
Net income / total assets