Pinnacle Case Summary

A) ­­­­­­­­­­­­­­­­­­­­­­­­­­Calculate at least five ratios that are useful for access going concern using Pinnacle’s financial statements, which are included in Figure 8-9. Document the ratios in a format similar to the following: Ratio 2009 2008 2007­­­­
1.Cash Ratio
0.03
0.36
0.43
2.Current Ration
0.63
0.79
0.85
3.Quick Ratio
1.72
2.06
2.20
4.Accounts receivable turnover
16.79
15.47
14.15
5.Days to collect receivables
21.74 days
23.59 days
25.80 days
6. Inventory turnover
4.35
4.01
3.68
7.Days to sell inventory
83.91 days
91.02 days
99.18 days
8.Debt to equity
0.46
0.33
0.32
9.Times interest earned
3.25
2.82
2.28
10. Earning per share
3.26
2.47
When reviewing the ratio calculations, it is apparent that the company’s likelihood of failing financially in the next 12 months is low. This is because it is apparent that the short-term debt paying ratios are down from the previous years. For example, the current ratio has decreased from the preceding year concluding that the current assets can cover the current liabilities successfully. Also looking at days to collect receivables is also lowered which presents that it takes less days for the company to collect their receivables implying that the monies owed to them are coming in more quickly. Lastly, in order for a company to succeed they need to have a good turnover rate for the inventory which is just what Pinnacle company has. The inventory turnover ratio is low indicating that it is taking fewer days than before to sell inventory.
C and D) are on the Excel Spreadsheet labeled Pinnacle Case Study Common-Size Income Statement