The production and analysis of financial statements are core tasks for accounting professionals. The activities for this final project have traditionally been
performed monthly by accountants in most organizations. However, with automation making accounting more efficient, many executives are requiring even
more frequent financial statements. This new reality further underscores the need for accurate transaction collection and adjustment computations.
Additionally, external users rely on ratio analyses to draw informed conclusions about a company’s financial health. This information often will factor heavily into
their investment and lending decisions.
In your final project, you will assume the role of an accountant and complete the year-end adjustment process for your company using a provided workbook.
This workbook is the first deliverable (Part I) of your final project. In Part II, you will analyze the provided financials of the same company and create a report
documenting your findings. The project is divided into three milestones, which will be submitted at various points throughout the course to scaffold learning and
ensure quality final submissions. These milestones will be submitted in Modules Three, Five, and Six. Final Project Part I will be submitted in Module Seven;
Final Project Part II is due in Module Eight.
In this assignment, you will demonstrate your mastery of the following course competency:
? ACC-307-02: Identify issues in financial reporting using key ratios and generally accepted accounting principles
Prompt
Use the provided workbook and the Final Project Part II template to create your report.
Specifically, you must address the critical elements listed below. Most of the critical elements align with a particular course competency (shown in brackets).
I. Part II: Ratio Analysis Report
A. Abstract: Summarize the story of profitability and liquidity for your company. In other words, highlight the most important aspects of your
report, including your major conclusions. [ACC-307-02]
B. Computations: Identify and describe your computations from the Financial Analysis tab of your workbook. Be sure to format your key results in
table or graphical format, as appropriate. Explain why each cited figure was included in your report in terms of its importance for the
organization. [ACC-307-02]
C. Comparison: Evaluate the financials of the company by comparing current ratios to both historical and industry-average ratios. Clearly identify
all unexpected or aberrant figures. [ACC-307-02]
D. Conclusion: Draw informed conclusions based on your computations and comparisons in the previous paragraphs. Be sure to justify your claims
with specific evidence and examples. [ACC-307-02]
2
Milestones
Milestone Three: Ratio Analysis Report Draft
In Module Six, you will submit a complete draft of your ratio analysis report – ATTACHED. This milestone will be graded with the Milestone Three Rubric.
Final Submission Part II: Final Ratio Analysis Report
In Module Eight, you will submit the second part of your final project, which is the final version of your ratio analysis report. It should be a complete, polished
artifact containing all of the critical elements of Final Project Part II. It should reflect the incorporation of feedback gained throughout the course. This
submission will be graded with the Final Project Part II Rubric.
Final Project Part II Rubric
Guidelines for Submission: Your ratio analysis report must be 2-3 pages in length (plus a cover page and references) and must be written in APA format. Use
double spacing, 12-point Times New Roman font, and one-inch margins. All references must be cited in APA format.
DELETE ALL TEXT IN ITALICS
Review the Final Project Guidelines and Rubric document to see how your paper will be
scored.
Be sure to follow APA format when providing references. If you have questions on APA
formatting, you can check the Purdue OWL website or seek help from the SNHU Writing Lab.
Notes on APA in a Formal Assignment
•
Use one-inch margins on all sides.
•
Use 12-point Times New Roman font with double spacing.
•
Paragraphs should be at least five to six sentences in length.
•
Do not include the headings “Introduction” and “Conclusion.” These are
included below to help you lay out your paper. APA format assumes that the
introduction begins the paper, the body continues the paper, and the conclusion
wraps up the paper, so those headings are not needed.
•
Indent the first line of every paragraph by 0.5”.
•
Be careful not to use personal pronouns such as “I.”
Make sure to delete headings such as Paragraph One, Paragraph Two, and so on.
Be sure to replace all of the text in italics with your own writing, which should not be in
italics. (This entire first page can be deleted after you review the guidelines. Your paper should
begin with the title page that follows.)
ACC 307 Final Project Part II: Ratio Analysis Report
[Your Name]
Southern New Hampshire University
REMEMBER: DELETE ALL TEXT IN ITALICS
Abstract (Delete this heading in your final paper)
In your opening paragraph, summarize the overall story of profitability and liquidity for
your company. In other words, highlight the most important aspects of your report, including
your major conclusions.
Paragraph One: Computations (Delete this heading in your final paper)
In your first body paragraph, complete the computations portion of your report: Identify
and describe your computations from the Financial Analysis tab of your workbook. Be sure to
format your key results in table or graphical format, as appropriate. Explain why each cited
figure was included in your report in terms of its importance for the organization.
Comparison Ratios:
2017
2016
2015
Industry Standard
Quick Ratio
Gross Margin
Net Margin
Return on Equity
Paragraph Two: Comparison (Delete this heading in your final paper)
In your second body paragraph, complete the comparison portion of your report:
Evaluate the financials of the company by comparing ratios to both historical and industryaverage ratios. Clearly identify all unexpected or aberrant figures.
Paragraph Three: Conclusions (Delete this heading in your final paper)
In your third body paragraph, draw informed conclusions based on your computations
and comparisons in the previous paragraphs. Be sure to justify your claims with specific
evidence and examples.
References
Wahlen, J. M., Jones, J. P., & Pagach, D. P. (2017). Intermediate accounting: Reporting and
analysis (2nd ed.). Boston, MA: Cengage Learning.
Make sure that you provide appropriate in-text citations in APA style with the author’s
name and year of publication (Author last name, year). The textbook is provided as an example
and should be kept in the references for your paper. Feel free to add other resources. To add
credibility to your paper, remember to cite ALL of the sources within the body of the paper, as
well as in the References list at the end. References should be in alphabetical order by the
author’s last name.
ACC 307 Final Project Part II: Ratio Analysis Report
Molly LeCompte
Southern New Hampshire University
Abstract
Ratio analysis is one quantitative tool that will be utilized to glean important information about
the profitability and liquidity of the company. Profitability ratios help to how company uses its
assets, equity, as well as, revenue to generate income. Liquidity ratios help to indicate how
company is managing its debts. In this paper, quick ratio, gross margin, net margin and return of
equity ratios of Peyton Approved Company are discussed.
Comparison Ratios:
The ratio is a conservative ratio that creditors typically use to assess a company’s short-term
liquidity. The indicator only considers assets that can be swiftly converted to cash; inventory is
not included because some inventories may take longer to convert. Cash, accounts receivable,
and marketable securities are all considered as assets. The following is the formula for
calculating it:
Quick ratio=
Current Assets?Inventory
Current Liabilities
The analysis also made use of the gross margin ratio. This ratio evaluates the difference between
the company’s net sales and gross profit. Higher ratios show that a company can acquire its stock
at a lower cost in relation to the selling price (Wahlen et al., 2017). It indicates how
advantageous an entity can sell its inventory. The following formula can be used to calculate the
ratio:
Gross Margin ratio=
Gross profit
Net sales
Thirdly, the net margin is a measure of profitability that is used to contrast a company’s net profit
to its net sales. It is possible to calculate the Peyton Approved Net Margin ratio as follows:
Net margin ratio=
net margin
Net sales
Return on equity is a profitable ratio that helps to indicate investors return from sales. It shows a
company’s capacity to make money off of shareholders’ equity.
[Return on Equity =Net Income ÷ Total Equity].
2017
Quick Ratio
1.84
Gross Margin
Net Margin
Return on Equity
0.59
0.28
0.91
Industry
Standard
2016
2015
2.2
2.8
1.75
0.55
0.22
0.9
0.7
0.32
0.78
0.7
0.24
0.8
Comparison
Over the previous two years, the company’s quick ratio has declined from 2.8 in 2015, 2.2 in
2016, and 1.84 in 2017. The company’s current liabilities have either grown in proportion to its
liquid assets. Furthermore, the ratio is higher the 1.75 industry average, showing that the firm
is managing its current obligations well. In addition, the gross margin declined from 0.7 in 2015
to 0.59 in 2017. It demonstrates that the company’s cost of acquiring items has increased. In a
similar vein, the net margin decreased over time from 0.32 to 0.28, from 2015 to 2017. The
company’s expenses have grown faster than its revenues (Easton, 2018). The ROE has increased,
supporting past conclusions that the firm’s earnings are increasing. From 0.78 in 2015 to 0.91 in
2017, the ROE increased.
Conclusions
In terms of liquidity, the company’s performance has been appalling to say the least. Its debt to
asset ratio has grown. If the pattern holds, creditors will have cause for concern in the future. The
decrease in the gross and net margins also indicates difficulties with the company’s profitability.
Although the ROE may have improved, it still cannot be depended upon to provide a clear
picture when used alone (Dance & Imade, 2018). The company can be searching for further
strategies, including selling long-term assets, to appease the shareholders.
References
Dance, M., & Imade, S. (2019). Financial ratio analysis in predicting financial conditions distress
in indonesia stock exchange. Russian Journal of Agricultural and Socio-Economic
Sciences, 86(2), 155-165.
Easton, Peter Douglas, Mary Lea McAnally, Gregory A. Sommers, and Xiao-Jun
Zhang. Financial statement analysis & valuation. Boston, MA: Cambridge Business
Publishers, 2018.
Wahlen, J. M., Jones, J. P., & Pagach, D. P. (2017). Intermediate accounting: Reporting and
analysis (2nd ed.). Boston, MA: Cengage Learning.
Asset Accounts
Acct #
Cash
Baking Supplies
Prepaid Rent
Prepaid Insurance
Baking Equipment
Office Supplies
Accounts Receivable
Accumulated Depreciation
Trademark
Leasehold Improvements
Accumulated Amortization
101
102
103
104
105
106
107
108
109
110
111
This chart of accounts should help you identify the appropriate accounts to record to as you are analyzing and
journaling transactions for this workbook. There is nothing to complete on this page; this is simply a resource
for you.
Liability Accounts
Equity Accounts
Acct #
Notes Payable
Accounts Payable
Wages Payable
Interest Payable
Loans Payable
he appropriate accounts to record to as you are analyzing and
is nothing to complete on this page; this is simply a resource
for you.
201 Common Stock
202 Dividends
203
204
205
Revenue Accounts
Bakery Sales
Merchandise Sales
Expense Accounts
Baking Cost of Goods Sold
Merchandise Cost of Goods Sold (FIFO)
Rent Expense
Insurance Expense
Misc. Expense
Business License Expense
Advertising Expense
Wages Expense
Telephone Expense
Interest Expense
Depreciation Expense
Amortization Expense
Office Supplies Expense
s
Acct #
301
302
ts
Acct #
401
402
ts
Acct #
501
502
503
504
505
506
507
508
509
510
511
512
513
Account
Cash
Baking Supplies
Merchandise Inventory (FIFO)
Prepaid Rent
Prepaid Insurance
Baking Equipment
Accumulated Depreciation
Leasehold Improvements
Accumulated Amortization
Trademark
Office Supplies
Accounts Receivable
Notes Payable
Interest Payable
Accounts Payable
Wages Payable
Loans Payable
Common Stock
Dividends
Bakery Sales
Merchandise Sales
Baking Cost of Goods Sold
Rent Expense
Interest Expense
Insurance Expense
Depreciation Expense
Amortization Expense
Misc. Expense
Office Supplies Expense
Business License Expense
Advertising Expense
Wages Expense
Telephone Expense
Merchandise COGS (FIFO)
Total
Peyton Approved
Trial Balance
2017
Unadjusted trial balance
Debit
Credit
64,713.72
165,250.00
25,750.00
7,500.00
2,400.00
17,000.00
3,285.72
10,000.00
2,000.00
2,300.00
1,600.00
30,401.00
10,000.00
27,325.00
21,000.00
30,000.00
20,000.00
335,675.00
35,200.00
90,000.00
2,780.00
375.00
5,200.00
3,456.00
15,760.00
464,485.72
464,485.72
Approved
Balance
017
Adjusting entries
Debit
Credit
137,400.00
400.00
2,642.86
2,000.00
1,350.00
1,518.75
5,700.00
137,400.00
1,518.75
400.00
2,642.86
2,000.00
1,350.00
5,700.00
151,011.61
151,011.61
Adjusted trial balance
Debit
Credit
64,713.72
27,850.00
25,750.00
7,500.00
2,000.00
17,000.00
5,928.58
10,000.00
4,000.00
2,300.00
250.00
30,401.00
10,000.00
1,518.75
27,325.00
5,700.00
21,000.00
30,000.00
20,000.00
335,675.00
35,200.00
137,400.00
90,000.00
1,518.75
400.00
2,642.86
2,000.00
2,780.00
1,350.00
375.00
5,200.00
5,700.00
3,456.00
15,760.00
476,347.33
476,347.33
Peyton Approved
Adjusting Journal Entries
2017
Date
Accounts
Debit
31-Dec Depreciation Expense
Accumulated depreciation
642.86
31-Dec Amortization Expense
Accumulated Amortization
2,000.00
31-Dec Interest Expense
Interest Payable
1,000.00
31-Dec Insurance Expense
Prepaid Insurance
400.00
Credit
642.86
2,000.00
1,000.00
400.00
31-Dec Baking Cost of Goods Sold
Baking Supplies
137,400.00
31-Dec Office Supplies Expense
Office Supplies
1,350.00
31-Dec Wages Expense
Wages Payable
5,700.00
137,400.00
1,350.00
148,492.86
5,700.00
148,492.86
Peyton Approved
Income Statement
For Year Ending 12/31/2017
Amount
Bakery Sales
Merchandise Sales
Total Revenues
Merchandise Cost of Goods Sold (FIFO)
Baking Cost of Goods Sold
Gross Profit
Operating Expenses:
Rent Expense
Interest Expense
Insurance Expense
Depreciation Expense
Amortization Expense
Misc. Expense
Office Supplies Expense
Business License Expense
Advertising Expense
Wages Expense
Telephone Expense
Total Operating Expenses:
Net Income
$ 335,675.00
$ 35,200.00
15,760.00
137,400.00
90,000.00
1,518.75
400.00
2,642.86
2,000.00
2,780.00
1,350.00
375.00
5,200.00
5,700.00
3,456.00
370,875.00
153,160.00
217,715.00
115,422.61
115,422.61
102,292.39
Peyton Approved
Closing Entries
For Year Ending 12/31/2017
Date
Accounts
Debit
31-Dec Bakery Sales
Merchandise Sales
Income Summary
335,675.00
35,200.00
31-Dec Income Summary
Baking Cost of Goods Sold
Rent Expense
Interest Expense
Insurance Expense
Depreciation Expense
Amortization Expense
Misc. Expense
Office Supplies Expense
Business License Expense
Advertising Expense
Wages Expense
Telephone Expense
Merchandise Cost of Goods Sold (FIFO)
31-Dec Income Summary
Retained Earnings
268,582.61
31-Dec Retained Earnings
Dividends
20,000.00
102,292.39
761,750.00
Credit
370,875.00
137,400.00
90,000.00
1518.75
400.00
2,642.86
2,000.00
2,780.00
1,350.00
375.00
5,200.00
5,700.00
3,456.00
15,760.00
102,292.39
20,000.00
761,750.00
Peyton Approved
Statement of Retained Earnings
For Year Ending 12/31/2017
Beginning Balance:
plus Net Income
less Dividends:
Ending Balance:
102,292.39 Incorrect due to milestone one err
20,000.00
82,292.39
due to milestone one errors not being corrected
Peyton Approved
Balance Sheet
As of December 31, 2017
Assets
Current Assets:
Cash
Baking Supplies
Merchandise Inventory (FIFO)
Prepaid Rent
Prepaid Insurance
Office Supplies
Accounts Receivable
Total Current Assets
Long Term/Fixed Assets:
Baking Equipment
Accumulated Depreciation
64,713.72
27,850.00
25,750.00
7,500.00
2,000.00
250.00
30,401.00
158,464.72
17,000.00
5,928.58
11,071.42
Leasehold Improvements
Accumulated Amortization
10,000.00
4,000.00
6,000.00
Trademark
2,300.00
Total Assets:
177,836.14
Peyton Approved
Balance Sheet
As of December 31, 2017
Liabilities and Owners’ Equity
Current Liabilities:
Accounts Payable
27,325.00
Wages Payable
5,700.00
Interest Payable
1,518.75
Total Current Liabilities
34,543.75
Long Term Liabilities:
Notes Payable
Loans Payable
Total Long Term Liabilities:
Total Liabilities:
31,000.00
65,543.75
Common Stock
Retained Earnings
10,000.00
21,000.00
30,000.00
82,292.39
Total Equity
112,292.39
Total Liabilities & Equity
177,836.14
Quick Ratio
Gross Margin
Net Margin
Return on Equity
2017
2016
2015 Industry Standard
1.84
0.59
0.28
0.91
2.2
0.55
0.22
0.9
2.8
0.7
0.32
0.78
1.75
0.7
0.24
0.8

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