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1PL3 - Alternatively from a management standpoint the ratio...

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Peach Blossom Cologne Company PL-3 Financial Ratio Analysis # Supporting Data Supporting Data Median Significant Ratio 2008 2008 2009 2009 2008 2009 Industry differences Current 1,230,103 397,534 1,251,838 226,265 3.09 5.53 1.90 A Quick 0.90 Accounts Receivable Turnover 10.43 Days' Receivables 35.00 Inventory Turnover 5.85 Days' Inventory 62.39 Asset Turnover 2.83 Income to Net Worth 0.12 Income to Total Assets 0.05 Liabilities to Net Worth 1.11 Liabilities to Total Assets 0.53 Times Interest Earned 3.00 cerning financial ratios: A The current ratio for the year ended 12/31/2009 is higher than that of the previous year and much higher than the industry median. This could imply that, from an auditing standpoint, current assets are inflated or that there are unrecorded current liabilities.
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Unformatted text preview: Alternatively, from a management standpoint, the ratio may imply that assets are underemployed. ACCOUNT POSSIBLE BUSINESS REASON FOR THE CHANGE POSSIBLE ERROR IN THE ACCOUNT 1 Cash-Big City National Bank The company may have borrowed funds. Fictitious entries may have been made to overstate each. 2 Accounts Receivable The company may not be collecting receivables as quickly as in the past. Fictitious sales may have been recorded. 3 Allowance for Doubtful Accounts The company may be expecting a lower proportion of uncollectible accounts. The allowance may be understated....
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