Discovers a significant change in a ratio

Assignment Help Econometrics

Reference no: EM131048137

Ratio and Trend Analysis When an auditor discovers a significant change in a ratio when compared with the prior year's ratio, the auditor considers the possible reasons for the change.

Required:

Give the possible reasons for the following significant changes in ratios:

A. The rate of inventory turnover (ratio of cost of sales to average inventory) has decreased from the prior year's rate.

B. The number of days' sales in receivables (ratio of average of daily accounts receivable to sales) has increased over the prior year.

Reference no: EM131048137

Questions Cloud

Risk class for which the appropriate capitalization rate : Assume that a firm belongs in a risk class for which the appropriate capitalization rate, ρc , is 12%, and the firm has $1,000,000 worth of debt and $5,000,000 worth of stock outstanding. If the riskless interest rate is 6%, what is this firm’s cost ..

Criteria specify a debt service coverage ratio : Consider an 8.5% loan amortizing at a 25-year rate with monthly payments. What is the maximum amount that can be loaned on a property whose net operating income (NOI) is $500,000 per year, if the underwriting criteria specify a debt service coverage ..

Industrial complex with an annual gross income : An industrial complex with an annual gross income of $5.5 million and operating income of $2.5 million is up for sale. Your investor group is interested in purchasing it, but need to determine its value. Recently, a similar complex with annual gross ..

Design systems to manage and monitor quality standards : Design systems to manage and monitor quality standards specified by the organization - demonstrate a quality culture to ensure continuous monitoring evaluation and development of the process

Discovers a significant change in a ratio : The number of days' sales in receivables (ratio of average of daily accounts receivable to sales) has increased over the prior year.

How the product was disruptive and the market at the time : The product or service should be a product that disrupted the market. Explain how the product was disruptive and the market at the time.

How much does leisure time planners : In 2009, LEISURE TIME PLANNERS, LLC rented a 10,000 SF office space from Martha Associates with the following terms: 5 year lease commencing on 1/1/2009, base rent of $4.00 PSF, and an expense stop of $2 PSF. In 2010, if utilities, property and other..

Reliance on analytical procedures would not be advisable : Give two examples of circumstances in which the auditor can rely on analytical procedures and two circumstances when reliance on analytical procedures would not be advisable.

Below average gross profit margin may result from : A below average gross profit margin may result from ?

User Account

All Pages