Ratio Analysis Memo

ACC/291: Principles of Accounting II

University of Phoenix

MEMORANDUM

TO: Dr. Riordan, Founder and All Employees

FROM: Team A

DATE: August 15, 2011

SUBJECT: Ratio Analysis

CC: Board of Directors

Team A has completed a ratio analysis for Riordan Manufacturing. The team analyzed liquidity ratios, profitability ratios, and solvency ratios. The team also did a horizontal and vertical analysis for company's balance sheet and the income statement.

Liquidity ratios are the temporary capabilities of a business to compensate for its established requirements and unanticipated needs for cash. Suppliers and bankers are the short-term creditors who are mostly interested in liquidity ratios. The acid-test ratio, current ratio, inventory ratio, and...