Case Study Part 1 Pinnacle Essay

interchange Ratio interchange and marketable securities/ incumbent liabilities 6,714,156/25,926,158 =0.03 (2009)6,369,431/17,605,301 = 0.36 (2008)7,014,387/16,340,517 = 0.43 (2007)Current Ratio cash +marketable securities+ net account receivables/ current liabilities 6,714,156+9,601,883/25,926,158 = 0.63 (2009)6,369,431+7,495,528/17,605,301 = 0.79 (2008)7,014,387+6,901,225/16,340,517 =0.85 (2007)Current Ratio current assets/ current liabilities44,497,169/25,926,158 = 1.72 (2009)36,195,745/17,605,301 = 2.06 (2008)36,005,390/16,340,517 = 2.20 (2007)Accounts receivable perturbation net sales/ fair make receivables (9,601,883 + 866,330) + (7,495,528+948,679) + (6,901,225 +862,690) = 26,676,335/3 = 8,892,111.7 average gross receivables 149,245,176/8,892,111.7 = 16.79 (2009)137,579,664/8,892,111.7 = 15.47 (2008)125,814,272/8,892,111.7 = 14.15 (2007)Days to collect receivables 365/accounts receivable turnover 365/16.79 = 21.74 eld (2009)365/15.47 = 23.59 geezerhood (2008)365/14.15 = 25.80 days (2007)Inventory turnover cost of goods shop/average inventory(28,031,323 +22,206,259 + 21,975,220) = 72,212,802 / 3 = 24,070,934 average inventory 104,807,966/24,070,934 = 4.35 (2009)96,595,908/24,070,934 = 4.01 (2008)88,685,361/24,070,934 = 3.68 (2007)Days to sell inventory 365/inventory turnover365/4.35 = 83.91 days (2009)365/4.01 = 91.02 days (2008)365/3.68 = 99.18 days (2007)Debt to beauteousness total liabilities/total equity25,926,158/55,825,756 = 0.46 (2009)17,605,301/52,758,726 = 0.33 (2008)16,340,517/50,872,536 = 0.32 (2007)Times interest earned in operation(p) income/interest expense6,171,502/1,897,346 = 3.25 (2009)5,998,463/2,128,905 = 2.82 (2008)4,745,339/2,085,177 = 2.28 (2007)Earning per sh be net income/average common shargons salient(ip) 3,260,411/1,000,000 = 3.26 (2009)2,470,557/1,000,000 = 2.47 (2008)1,493,609/1,000,000 = .1.49 (2007)Gross profit percent net sales cost of goods change/net sales (149,245,176- 104,807,966)/149,245,176 =29.77%(137,57 9,664 96,595,908)/137,579,664 =29.79%(125,814,272 88,685,361)/125,814,272 =29.51%Profit Margin operating income/net sales6,171,502/149,245,176 =0.045,998,463/137,579,664 =0.044,745,339/125,814,272 =0.04Return on assets income before taxes/average total assets(102,968,775 + 89,791,858 + 86,673,853)=279374486/3 =93,124,828.7 average total assets 4,274,156/93,124,828.7= 0.053,869,558/93,124,828.7=0.042,660,162/93,124,828.7=0.03Return on common equity income before taxes- best-loved dividends/average melody holder equity (55,825,756+52,758,726+50,872,536)=189,457,018/3 =63,152,339.3 average stock holder equity (4,274,156-0)/63,152,339.3 =0.07(3,869,558 -0)/63,152,339.3 =0.06(2,660,162 -0) / 63,152,339.3 =0.04B) Based on your calculations, assess the likelihood (high, medium, or low) that Pinnacle is likely to fail financially in the next 12 months. When reviewing the ratio calculations, it is apparent that the high societys likelihood of failing financially in the next 12 months is low. This is because it is apparent that the short-term debt paying ratios are down from the previous roles. For example, the current ratio has decreased from the preceding year concluding that the current assets can cover the current liabilities successfully. Also feeling at days to collect receivables is also lowered which presents that it takes less days for the company to collect their receivables implying that the monies owed to them are coming in more quickly. Lastly, in order for a company to succeed they need to have a good turnover rate for the inventory which is just what Pinnacle company has. The inventory turnover ratio is low indicating that it is taking fewerdays than before to sell inventory. C and D) are on the Excel Spreadsheet denominate Pinnacle Case Study Common-Size Income Statement C)Account Balance thought of $ of authorization Misstatement Training37,621Miscellaneous expenses74,791Rent125,115Legal Fees232,798Miscellaneous office expenses211,874D)Account BalanceEstimate of $ of Potential MisstatementWelburn functionTraining26,928Depreciation880,286Executive salaries174,362Solar-Electro DivisionLegal fees234,669Miscellaneous office expense202,331Machine-Tech DivisionDepreciation66,596E) Explain whether you believe the information in requirement c or d provides the most utilizable data for evaluating the potential for misstatements. Explain why.I believe that the information in requirement d provides the most useful data for evaluating the potential for misstatements because you can see exactly what distributively share is claiming in each sub-category. When employ the information in requirement c, you are getting an overview of what all the divisions have d unmatchable and cannot tell which division each misstatement is coming from. Also, by using information from requirement d, the auditor has a better chance of depicting the misstatements because you are focused on one specific division instead of trying to figure out which d ivision the misstatement might have been from. Requirement d is more informative thanusing requirement c.