accounting
esyim
part_2.docxUse your completed workbooks to prepare your ratio analysis and memo, which will include an overview of the company’s accounting system, discussion of theresults of operations and what those results mean, and a discussion on what changes in operations might need to be made to make the company moreprofitable. This memo will be used as part of a loan package to request additional funding for potential expansion in year two.Specifically, the following critical elements must be addressed:
1. Ratio Analysis
a) Create a ratio analysis. Be sure to include all required ratios.
Working Capitol Current Ratio Cash Ratio Acid test ratio Gross profit percentage Accounts receivable Turnover Ratio Debt Ratio Debt to Equity Ratio Profit Margin ratio Rate of return on total assets
b) Annotate each ratio. What does the ratio tell you?
c) Why is ratio information useful? What decisions will you make based on the ratio?
2. Prepare a Memo to a Bank
a) Provide an overview of the company’s accounting system. What basis of accounting is used? Why?
b) What strategies is the business using to ensure responsible accounting practices? Why have these strategies been selected?
c) Describe the overall accounting process. For example, when are entries made, how often are statements produced and reviewed, and why?
Describe the internal controls for cash that are in place.
d) Analyze the results of operations. What do these results tell a business?
e) What do the statements themselves tell about the strengths and weaknesses of the company’s financial position? What does the ratio analysistell someone about the strengths and weaknesses in the company’s financial position?
g) What are the company’s financial strengths and weaknesses? What specific changes can be made to alleviate the weaknesses?
h) What opportunities can the company explore because of its strengths? How would these be beneficial?
