Analytical Procedures—Ratio Analysis Form
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.
AUDITING COURSE PROJECT
GROUP B:
CLIENT NAME: Pinnacle Manufacturing Company
DATE OF FINANCIAL STATEMENTS: July 15, 2009
LIQUIDITY RATIOS
2009 2008 2007 
1.Current ratio =    
Current Assets    
Current Liabilities 1716 2056 2203 
Comments:
Since the current ratio is greater one, it suggests that the company will  be able to pay off its obligations.

2009 2008 2007 
2.Quick or acid test ratio =    
Current Assets  Inventory    
Current Liabilities 0.635 0.795 0.895 
Comments:
When the ratio is less than one it means the company cannot pay their current liabilities.

PROFITABILITY RATIOS
2009 2008 2007 
1.Gross profit ratio =    
Net Sales  Cost of Goods Sold    
Net Sales 0.298 0.298 0.295 
Comments:
The company retains about $0.30 from every $1.00 towards paying off selling, general, and administration expenses, interest expenses and distributions to shareholders.
2009 2008 2007 
2.Operating margin ratio =    
Income before Income Taxes and Interest    
Net Sales 0.041 0.044 0.038 
Comments:
The company has a higher financial risk because of the low operating  margin.

2009 2008 2007 
3.Net income ratio (or profit margin ratio) =     Net Income    
Net Sales 0.022 0.018 0.012 
Comments:
There is a slight profit for the year.


2009 2008 2007 
4.Return on total assets ratio =    
Net Income + Interest Expense    
Total Assets 0.050 0.051 0.041 
Comments:
The company earns about $0.05 for each $1.00 of assets. 

2009 2008 2007 
5.Return on equity ratio =    
Net Income    
Average Stockholders’ Equity 0.058 0.047 0.029      
Comments:
The company generates between $0.06  $0.03 profits with the amount  that shareholder has invested.

LEVERAGE RATIOS
2009 2008 2007 
1.Debt to assets ratio =    
Total Debt    
Total Assets 0.458 0.412 0.413 
Comments:
For each year reported, the total debt to assets ratio is less than 50%.  This is favorable as the higher the ratio the more debt the company has. 
 20__ 19__ 19__
2.Debt to equity ratio =    
LongTerm Debt    
Stockholder’s Equity _____ _____ _____ _____
Comments:



20__ 20__ 19__ 19__
3.Times interest earned ratio =    
Income before Income Taxes and Interest    
Interest Expense _____ _____ _____ _____
Comments:



ACTIVITY RATIOS
20__ 20__ 19__ 19__
1.Inventory turnover =    
Cost of Goods Sold    
Average Inventory _____ _____ _____ _____
Comments:



20__ 20__ 19__ 19__ 2.Average age of inventory =    ...
Please join StudyMode to read the full document