| Course | WMBA 6050 Accounting for Management Decision Making |
|---|---|
| Week | Week 2 |
| Paper type | Ratio memo |
| Length | About 830 words, 5 pages |
| Format | Memo, APA 7 citations |
| School | Walden University |
| Program | Master of Business Administration (MBA) |
| Updated | October 2026 |
Free sample paper for WMBA 6050 Week 2
Memorandum
To: Owner, Briar Hollow Golf Club
From: Food and Beverage Manager
Date: November 18
Re: What six ratios say about last season, and the one that needs action
Summary
You asked me to look at last season's results with fresh eyes before the budget meeting. Six ratios tell a consistent story. The club earns good margins by the standard of publicly traded recreation companies, and its revenue per round is rising. But its short-term liquidity has weakened, and the reason is specific: we are spending wedding deposits, which are money owed to future events, on the irrigation project. I recommend we stop doing that.
The Ratios
Table 1
Six Ratios, Two Seasons and a Benchmark
| Ratio | Prior season | Last season | Benchmark | |
|---|---|---|---|
| Operating margin (operating income / revenue) | 10.2% | 11.5% | 9.7% for US recreation firms | |
| EBITDA margin | 17.5% | 18.6% | 16.6% for US recreation firms | |
| Food, beverage and banquet department margin | 38.9% | 36.6% | About 32% gross margin for US restaurant firms | |
| Green and cart revenue per round | $65.60 | $68.60 | None comparable | |
| Current ratio (current assets / current liabilities) | 1.21 | 0.88 | 1.0 as a floor | |
| Times interest earned (operating income / interest) | 3.1 | 3.7 | None comparable | |
Club figures are composite; benchmarks are January 2026 sector figures for publicly traded US firms (Damodaran, 2026) and are a rough guide for a single club.
What Each Ratio Says
Operating margin rose from 10.2 to 11.5 percent, above the 9.7 percent pre-tax operating margin reported for the 49 publicly traded US recreation firms in Damodaran's January 2026 data. Those firms are large and varied, so the comparison is rough, but it suggests the course is not underperforming its industry. The improvement came mainly from higher green fees, not lower costs.
EBITDA margin, which adds back depreciation, rose to 18.6 percent. That matters because depreciation will rise as the new irrigation system enters service; EBITDA shows the club's cash-generating ability before that accounting charge.
The food, beverage and banquet margin, after food costs and department payroll, fell from 38.9 to 36.6 percent. It remains above the roughly 32 percent gross margin of publicly traded restaurant companies, whose cost of sales includes labor, but the decline is mine to explain. Food costs rose about two points as a share of sales, mostly on beef and seafood for weddings, and our banquet menu prices were last revised two seasons ago. I will bring a revised banquet price list to the budget meeting.
Revenue per round rose from $65.60 to $68.60, a 4.6 percent increase, while rounds rose about 2 percent. The club raised prices without losing volume, which suggests there is still room on weekend morning rates.
The current ratio fell from 1.21 to 0.88. A current ratio below 1.0 means current liabilities exceed current assets. Here the change has one main cause. Customer deposits for next season's weddings rose to $410,000, recorded as a liability, while cash fell because we paid for the first phase of irrigation from operations. In effect, the club's cash, about $520,000, no longer covers the deposits together with the supplier and payroll bills due this winter; part of next summer's wedding money is now in the ground as pipe.
Times interest earned rose from 3.1 to 3.7, so the club covers its interest comfortably. That is relevant to the recommendation below: the club can carry more debt.
Why the Current Ratio Matters Most
The other ratios describe a business that is doing well. The current ratio describes a risk. If weddings are canceled, deposits may have to be refunded, and if next season starts slowly, the club will need to pay suppliers and staff for food and labor at events whose deposits it no longer holds. Penman (2013) emphasizes that ratios are signals to be explained by the business behind them, not verdicts, and this one is easily explained. That is exactly why it can be fixed.
What the Ratios Cannot Show
Ratios compress a season into a few numbers, and three things fall outside them. They do not show the condition of the course itself, which is the club's main asset and the reason golfers return; a season of deferred maintenance could raise margins this year and lower rounds next year. They do not show how many weddings are already booked for next season, which is the best early sign of next year's banquet revenue. And they do not show weather, which moved last season's rounds by several hundred in May alone. I would read the ratios alongside those three facts before drawing conclusions about the club's direction.
Recommendation
Finance the remaining two phases of the irrigation replacement, about $1.2 million, with a term loan of fifteen to twenty years, and keep cash at least equal to customer deposits from now on. At the current interest coverage of 3.7, the club can carry the added interest. Datar and Rajan (2021) note that managers should judge results with measures matched to the decision at hand, and for this decision the right measure is liquidity, not profit.
References
Damodaran, A. (2026). Operating and net margins by sector (US) [Data set]. NYU Stern School of Business. https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html
Datar, S. M., & Rajan, M. V. (2021). Horngren's cost accounting: A managerial emphasis (17th ed.). Pearson.
Penman, S. H. (2013). Financial statement analysis and security valuation (5th ed.). McGraw-Hill.
The Walden WMBA 6050 Week 2 instructions
Ratio assignments in managerial accounting usually ask for more than computation. Students calculate a set of ratios across periods, compare them with an industry figure where one exists and write a paragraph after each that turns the movement into a statement about the business. Most prompts specify a memo with an addressee, and the register should suit that reader throughout. Instructors expect ratios chosen for relevance rather than a long list, honest treatment of benchmark limitations and a recommendation tied to the most important finding. Memos of three to four pages with one table are common. Public sources of industry ratios vary in fit, so stating why a benchmark is or is not comparable is part of the analysis, not a footnote.
How this WMBA 6050 Week 2 example is built
The memo opens with a summary for the owner: good margins, rising revenue per round and weakened liquidity with a specific cause. A table shows six ratios for two seasons beside a benchmark where one exists, with a note on the sector data's limits. Paragraphs then take each ratio in turn: operating margin and EBITDA margin against public recreation firms, the food and beverage margin and its causes, revenue per round and pricing room, the current ratio and the spent deposits, and times interest earned. A section explains why the current ratio matters most, citing Penman on ratios as signals to be explained. The recommendation proposes a term loan and a rule to keep cash at least equal to deposits, with a nod to Datar and Rajan. Margin comments sit beside the summary, the current ratio section and the recommendation.
Where the marks sit in the WMBA 6050 Week 2 rubric
Graders look for correct ratio calculations, consistent across the table and the text. Paragraphs that explain what each movement means for the business, rather than restating the number, carry most of the weight. Using a benchmark with its limitations stated shows care. Identifying which ratio signals a real risk, and explaining its cause, demonstrates judgment. Coherence is rewarded when the closing advice grows out of the figures and a second ratio shows the fix is affordable. Memo conventions matter: a subject line stating the main finding, a summary first and a register suited to the addressee. Instructors also reward plain language for a non-accountant reader. Clean formatting and accurate APA references, including data sources, account for the final points.
Common WMBA 6050 Week 2 mistakes, and how to avoid them
Choose five or six ratios that say something about the decisions your reader faces, not every ratio in the textbook. Compute them for two periods and check each calculation twice. Find a benchmark if one exists and say how comparable it is. Then write one paragraph per ratio: what moved, why and what it means. Students often lose marks by listing ratios with no interpretation, or by comparing a small business with a large-company benchmark without comment. Another common gap is a memo that ends without a recommendation. Put the main finding in the subject line. Write for the person named in the To line. If you want a custom sample ratio memo using your own organization's statements, send us two years of figures.
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WMBA 6050 Week 2 questions, answered
Where can I find a free WMBA 6050 Week 2 sample paper?
The full ratio memo to a golf club's owner, six ratios included, appears below.
How do the club's margins compare with the benchmark?
Its operating margin of 11.5 percent exceeds the 9.7 percent reported for US recreation firms.
Which ratio signals a problem?
The current ratio, which fell from 1.21 to 0.88.
Why did the current ratio fall?
Wedding deposits rose while cash was spent on the first phase of irrigation.
What does the memo recommend?
Financing the remaining irrigation work with a long-term loan and keeping cash at least equal to deposits.