Pinnacle Manufactuirng Part I Essay

840 Words4 Pages
Analytical Procedures Problem 8-40 Devry University ACCT444 January 24, 2013 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: | Pinnacle Manufacturing Company | DATE OF FINANCIAL STATEMENTS: | For Period/Dates Ending December 31, 2009, 2008, 2007 | LIQUIDITY RATIOS 2009 | 2008 | 2007 | | | | | Current Assets | 44,497,169 | 36,195,745 | 36,005,390 | Current Liabilities…show more content…
However these ratios should be checked against | other companies that make diesel engines. | | 2009 | 2008 | 2007 | | | | | Operating Income | 6,171,502 | 5,998,463 | 4,745,339 | Net Sales | 149,245,176 | 137,579,664 | 125,841,272 | 5. Operating margin ratio = | 0.041 | 0.044 | 0.038 | Comments: Net profit of about $0.04 is made on each dollar of sales. They need to lower their costs, so | a higher value can be obtained. | b. There is a low risk that Pinnacle will fail financially in the next twelve months. The company has been profitable the past three years, is generating significant cash flows and most of the ratios indicate no financial difficulties. The current ratio and debt to equity have deteriorated slighlty, but not enough to cause significant concerns. c. See Excel Spreadsheet. Accounts we believe that are a concern for material misstatements; 1. Property Taxes – This decreased by about $140,000 when Pinnacle taxes should have increased as they acquired two more companies. 2. Bad Debts – Decreased by approximately $82,000. However since sales have increased, there should be a direct relationship with bad debts. So bad debts should be higher in 2009 than it is in 2008. 3. Depreciation Expense - Increased by $1.2 million, assumed due to the new acquired companies. 4. Legal Service – Increased by

    More about Pinnacle Manufactuirng Part I Essay

      Get Access