Running Head: ACCOUNTING 1
ACC 308 Final Project Milestone One
Southern New Hampshire University
March 20,2022
ACCOUNTING 2
The Peyton Approved Company has witnessed a financially profitable year for the
year 2017. However, some decrease has been seen in the ratio analysis report as per the
managerial point of view. Here, I will compare the accounts receivable turnover, current
ratio, inventory turnover, quick ratio, return on sales, gross margin, return on assets and
return on equity between the period of 2016 to 2017 to evaluate the company's overall
financial health (Wahlen et al., 2017).
At first, the current assets have been divided by current liabilities to determine the
working capital or the current ratio. Moreover, the quick assets have been divided by current
liabilities to determine the quick ratio. For example, the quick assets include accounts
receivables, marketable securities, and cash. Additionally, the net value of credit sales in the
given period of time has been divided by the average accounts receivable in the same period
of time to determine the accounts receivable turnover ratio. Usually, the inventory turnover
ratio takes a multiple-step process to calculate (Wahlen et al., 2017). At the first step, the
beginning inventory can be added to the previous year’s ending inventory and then, it can be
divided by 2. After that, the average can be divided by the sold good’s cost to identify the
ratio. Further, the gross profit dollars of the company have been divided by its’ net sales
dollars to calculate the gross margin of the Peyton Approved company. Moreover, the net
income has been divided by the total revenue to calculate the return on sales ratio. The
