ANALYTICAL PROCEDURES—RATIO ANALYSIS FORM

The auditor can use this form to document the performance and evaluation of ratio analysis in connection with analytical procedures performed in an audit. The form is only a guide and is not a substitute for professional judgment. The form may be modified by adding or omitting certain ratio analysis.

CLIENT NAME:

DATE OF FINANCIAL STATEMENTS:

LIQUIDITY RATIOS

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1.Current ratio =

Current Assets

Current Liabilities____________________

Comments:

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2.Quick or acid test ratio =

Current Assets - Inventory

Current Liabilities____________________

Comments:

PROFITABILITY RATIOS

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1.Gross profit ratio =

Net Sales - Cost of Goods Sold

Net Sales____________________

Comments:

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2.Operating margin ratio =

Income before Income Taxes and Interest

Net Sales____________________

Comments:

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3.Net income ratio (or profit margin ratio) =

Net Income

Net Sales____________________

Comments:

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4.Return on total assets ratio =

Net Income + Interest Expense

Total Assets____________________

Comments:

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5.Return on equity ratio =

Net Income

Average Stockholders’ Equity____________________

Comments:

LEVERAGE RATIOS

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1.Debt to assets ratio =

Total Debt

Total Assets____________________

Comments:

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2.Debt to equity ratio =

Long-Term Debt

Stockholder’s Equity____________________

Comments:

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3.Times interest earned ratio =

Income before Income Taxes and Interest

Interest Expense____________________

Comments:

ACTIVITY RATIOS

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1.Inventory turnover =

Cost of Goods Sold

Average Inventory____________________

Comments:

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2.Average age of inventory =

360 Days

Inventory Turnover____________________

Comments:

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3.Accounts receivable turnover =

Net Sales

Average Accounts Receivable____________________

Comments:

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4.Days sales in accounts receivable =

360 Days

Accounts Receivable Turnover____________________

Comments:

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5.Asset turnover =

Net Sales

Total Assets____________________

Comments:

Prepared by

Date

Approved by

Date