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Intermediate Accounting I (ACC307) 8-1 Ratio Analysis Report - Final

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John Marsh
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Southern New Hampshire University

Intermediate Accounting I (ACC307)

Peyton Approved Ratio Analysis Report
The primary goal of ratio analysis is to determine the profitability of a company.
Wahlen et al. (2017) describes ratios as “…relationships between and among items on financial
statements. They are useful indicators of financial position and performance, serving as metrics
to evaluate a company’s results over time and against its competitors”. This analysis report will
use historical ratios from 2015 – 2017 to draw a comparison from one year to another.
Additionally, the report includes the industry standard to identify comparable trends. When
evaluating the operational and financial performance of Peyton Approved’s fiscal year 2017, this
report focuses on the Quick Ratio, Gross Margin, Net Margin, and Return on Equity ratios. The
gross margin and net margin are both below the industry standard these categories both ticked up
slightly from 2016. The quick ratio and return on equity exceeded the industry standard and
indicate solid financial performance.
The calculated ratios for each category indicate Peyton Approved is a convincingly
strong and financially healthy business. The following details the explanation and figures utilized
to compute the ratio for each category. The quick ratio was determined by dividing liquid assets
by current liabilities. Liquid assets are cash and other assets that a company can expect to
convert into cash quickly. The quick ratio formula does not include inventory, supplies and prepaid expenses but they may not be quickly converted into cash.

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Intermediate Accounting I (ACC307) 8-1 Ratio Analysis Report - Final

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