| Course | AC298 Associate's Capstone in Accounting |
|---|---|
| Unit | Unit 5 |
| Paper type | Ratio analysis |
| Length | About 570 words, 5 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | Associate of Applied Science in Accounting |
| Updated | October 2026 |
Free sample paper for AC298 Unit 5
Eight Ratios From Adjusted Figures Only: A Unit 5 Ratio Analysis for a Tile and Flooring Store
[Student Name]
Purdue University Global
AC298: Associate's Capstone in Accounting
Unit 5 Ratio Analysis
[Instructor Name]
[Date]
Kiln Road Tile & Flooring, its statements and its January 1 balances are composite; the textbook and the ratio research cited are real.
Why Adjusted Figures Only
From the unadjusted trial balance, current assets were $144,230 and current liabilities $21,200, a current ratio of 6.80. The adjustments moved $1,620 of shrinkage and $2,300 of bad debts out of current assets, used up $550 of insurance and $900 of supplies, and added $1,900 of wages payable. The adjusted figures, B-1 and B-2 on the reference sheet, give 6.01. A ratio built from draft figures describes a balance sheet nobody will ever see.
Inputs
Carried from Unit 4: S-1, net sales, $674,100; S-2, cost of goods sold, $414,340; S-3, gross profit, $259,760; S-4, net income, $31,460; owner's equity $132,160 (S-5); current assets $138,860 (B-1); current liabilities $23,100 (B-2); total liabilities $43,100 (B-3); cash $6,510; net receivables $39,200; inventory $89,900. From last year's balance sheet: inventory $84,000, net receivables $36,000 and capital $148,700 on January 1.
The Ratios
1. Current ratio: $138,860 divided by $23,100 equals 6.01. Reading: the store could pay its next year's obligations six times over, but most of that cover is tile on the shelves.
2. Quick ratio: cash plus net receivables, $45,710, divided by $23,100 equals 1.98. Reading: without inventory, cover falls to about two times, and cash alone covers less than a third of current liabilities.
3. Gross margin: $259,760 divided by $674,100 equals 38.5 percent. Reading: a healthy margin for flooring retail, where tile and vinyl carry higher markups than installation supplies.
4. Net profit margin: $31,460 divided by $674,100 equals 4.7 percent. Reading: wages and rent consume most of the gross margin.
5. Inventory turnover: $414,340 divided by average inventory of $86,950 equals 4.77 times, or about 77 days on hand. Reading: tile sits about two and a half months before it sells.
6. Receivables turnover: net sales of $674,100 divided by average net receivables of $37,600 equals 17.9 times, or about 20 days. Reading: because cash sales are included in net sales, this understates contractor collection time; contractors alone are closer to 40 days against 30-day terms.
7. Debt to equity: $43,100 divided by $132,160 equals 0.33. Reading: lightly borrowed; creditors fund a quarter of the assets.
8. Return on owner's equity: $31,460 divided by average equity of $140,430 equals 22.4 percent. Reading: a strong return, though equity is shrinking because withdrawals exceeded income.
The ratios together say the store is profitable and lightly indebted but short of cash, because its money is waiting in 77 days of inventory and in contractor accounts that pay later than their terms.
Limits
One year of figures cannot show a trend, and a single store has no industry comparison in this capstone. Ratios are most useful as warning signs read together; research on business failure found that measures of cash flow and liquidity were among the earliest signals of trouble (Beaver, 1966), and later models combined several ratios into one score for the same purpose (Altman, 1968). Here the liquidity ratios look strong only because inventory is large. Ratio formulas follow the textbook definitions (Franklin et al., 2019), and the receivables ratio is flagged because the data do not separate credit sales.
References
Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23(4), 589-609. https://doi.org/10.1111/j.1540-6261.1968.tb00843.x
Beaver, W. H. (1966). Financial ratios as predictors of failure. Journal of Accounting Research, 4, 71-111. https://doi.org/10.2307/2490171
Franklin, M., Graybeal, P., & Cooper, D. (2019). Principles of accounting, volume 1: Financial accounting. OpenStax. https://openstax.org/details/books/principles-financial-accounting
Reading the AC 298 Unit 5 instructions
The fifth AC298 unit asks for a ratio analysis of the capstone business using the adjusted statements. Explain first why only adjusted figures are used, ideally by showing how a draft figure would differ. List the inputs with their reference numbers from the statement package, plus any prior-year balances needed for averages. Compute the ratios your instructions name, usually two or more from liquidity, profitability, efficiency and solvency. For each, show the formula with figures and write a short reading of what it means for this business. Flag any ratio the data cannot fully support. Close with a combined conclusion and the analysis's limits. Three pages covers most analyses comfortably. Cite the textbook and any research on ratios in APA 7.
Inside the AC298 Unit 5 example
The sample's opening note compares draft current assets and liabilities with the adjusted figures and explains each change. An inputs section lists every figure with its S or B reference and the January 1 balances used for averages. Eight numbered ratios follow, each with its computation and a reading: 6.01, 1.98, 38.5 percent, 4.7 percent, 4.77 times or 77 days, 17.9 times with a caution about cash sales, 0.33 and 22.4 percent. A highlighted sentence then reads the eight together as one finding about cash. A limits section notes the single year and missing industry comparison and cites research on ratios as early warning signs.
Where the points sit in the AC298 Unit 5 rubric
Ratio analyses are graded on correct inputs, correct calculations and useful readings. Using adjusted figures, cited by reference, is a frequent scoring point in this capstone. Averages should be used where the ratio mixes a period flow with a balance. Each reading should say what the figure means for this business, not define the ratio. Flagging a ratio the data cannot fully support shows judgment. A combined conclusion earns interpretation credit. Limits should be specific. Clear formatting and APA 7 citations finish the assessment of the analysis. Because the Unit 8 memo will quote these readings, an analysis whose readings are specific enough to cite by number makes the later unit easier to grade and to write.
Common AC298 Unit 5 mistakes, and how to avoid them
The most frequent ratio errors are using draft figures, using gross instead of net receivables, and dividing turnover by a year-end balance when averages are available. Others compute receivables turnover on total sales without noting that cash sales are included. Readings repeat the number instead of interpreting it. Each ratio is discussed separately and no conclusion ties them together. Limits are omitted, so the reader cannot tell which ratios deserve confidence. A current ratio of 6 can look reassuring until the reader notices that nearly two thirds of current assets are inventory that has not sold yet. If your statement package is done and you need the ratios computed and read, a writer can build the analysis from your adjusted figures.
Get an AC298 Unit 5 example written to your instructions
Your adjusted statements, or the figures from your Unit 4 package, are the only inputs this analysis should use; add the Unit 5 instructions, the ratio list if one is set, and the rubric. The free first analysis returns within 24-48h, each ratio tied back to a line you submitted. Benchmarks come from your problem only. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC298 Unit 5 questions, answered
Which ratios should a capstone analysis include?
The ones your instructions list, first. Where the choice is open, two from each family, liquidity, profitability, efficiency and solvency, cover what an owner or lender asks. For a retailer, inventory turnover and gross margin are hard to leave out. More ratios do not earn more credit if each one lacks a reading. Twelve bare results usually score below eight interpreted ones.
What if my problem gives only one year of data?
Then comparison has to come from somewhere else, usually an industry figure your section provides or the terms the business itself sets, such as 30-day credit terms against actual collection days. The sample uses whatever benchmark the problem supplies and says plainly when none exists, rather than inventing an average to compare against. A stated policy is itself a benchmark worth using.
Should I use year-end or average balances?
Averages are more accurate for turnover ratios, since sales happen across the year while a year-end balance is a single day. Many capstone problems supply only one balance sheet, though, which forces year-end figures. Either choice is acceptable when disclosed in a line under the table. What loses points is mixing the two within one analysis.
Where can I find a free AC298 Unit 5 sample paper?
The complete AC298 Unit 5 ratio analysis on this page computes eight ratios for a tile and flooring store from adjusted figures and explains what each says about the business.
Why does the AC298 Unit 5 sample flag receivables turnover?
Net sales include cash sales, so dividing them by receivables makes collection look faster than it is. Contractors alone pay in about 40 days against 30-day terms.