Your dog, Peyton, has severe allergies and cannot have the usual store-bought dog treats. You have been making homemade treats for him that are all-natural and hypo-allergenic. Over the past year, you have been making and selling these treats out of your home and have been quite successful. You now have an opportunity to open your own dog treat bakery. You have decided on a corporate form of business and have named your company“ Peyton Approved.”
During the first part of this final project, you were asked to follow the business transactions for a six-month period from that initial stage of analysis and recording through the reporting process. Now, you will use this information to compose a memorandum to the bank detailing the results of operations as communicated in the financial statements you have produced based on the business transactions for the period.
Use your completed workbooks to prepare your ratio analysis and memo, which will include an overview of the company’ s accounting system, discussion of the results of operations and what those results mean, and a discussion on what changes in operations might need to be made to make the company more profitable. This memo will be used as part of a loan package to request additional funding for potential expansion in year two.
Specifically, the following critical elements must be addressed: 1. Ratio Analysis
a) Create a ratio analysis. Be sure to include all relevant ratios.
b) Discuss each ratio. What does the ratio tell you?
c) Why is ratio information useful? What decisions will you make based on the ratio?
2. Prepare a Memo to a Bank
a) Provide an overview of the company’ s accounting system. What basis of accounting is used? Why?