11 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: DATE OF FINANCIAL STATEMENTS: LIQUIDITY RATIOS 20__20__19__19__ 1. Current ratio = Current Assets Current Liabilities____________________ Comments: 20__20__19__19__ 2. Quick or acid test ratio =
Current Assets - Inventory Current Liabilities____________________ Comments: PROFITABILITY RATIOS 20__20__19__19__ 1. Gross profit ratio = Net Sales - Cost of Goods Sold Net Sales____________________ Comments: 20__20__19__19__ 2. Operating margin ratio = Income before Income Taxes and Interest Net Sales____________________ Comments: 20__20__19__19__ 3. Net income ratio (or profit margin ratio) = Net Income Net Sales____________________ Comments: 20__20__19__19__ 4. Return on total assets ratio = Net Income + Interest Expense Total Assets____________________
Comments: 20__20__19__19__ 5. Return on equity ratio = Net Income Average Stockholders’ Equity____________________ Comments: LEVERAGE RATIOS 20__20__19__19__ 1. Debt to assets ratio = Total Debt Total Assets____________________ Comments: 20__20__19__19__ 2. Debt to equity ratio = Long-Term Debt Stockholder’s Equity____________________ Comments: 20__20__19__19__ 3. Times interest earned ratio = Income before Income Taxes and Interest Interest Expense____________________ Comments: ACTIVITY RATIOS 20__20__19__19__ 1. Inventory turnover =
Cost of Goods Sold Average Inventory____________________ Comments: 20__20__19__19__ 2. Average age of inventory = 360 Days Inventory Turnover____________________ Comments: 20__20__19__19__ 3. Accounts receivable turnover = Net Sales Average Accounts Receivable____________________ Comments: 20__20__19__19__ 4. Days sales in accounts receivable = 360 Days Accounts Receivable Turnover____________________ Comments: 20__20__19__19__ 5. Asset turnover = Net Sales Total Assets____________________ Comments: Prepared by Date Approved by Date
