Essay on Financial Analysis Task1

5658 Words Jan 16th, 2014 23 Pages
The Financial Analysis of Competitive Bikes Inc. involves a complete assessment of the liquidity, profitability, competitiveness, and stability of the business. These reports will be using both the income statements and balance sheet provided by the business. Financial statement information is used by both internal and external users including creditors, investors, managers, and executives to make business decisions (Edmonds et al., 2010, p.100) The main objective of Competitive Bikes Inc. financial statement analysis is the examination of the firm’s financial position and returns in relation to risk.
In this report, the Horizontal Analysis will show changes in the amounts of corresponding financial
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An increase in cost of goods sold reflects a change of $1,048,000.00 which translates to higher sales of the bikes and brought about the gross profits of $447,000. Thus, the increase is favourable indicating that the company profitability significantly increased in year 7 compared to year 6.

In general the operating expenses have impact on the increase in sales. As reported, advertising cost increased in year 7 by $8,940 a 37.5% change, indicating that the sales promotion strategy increases sales. Likewise, sales commissions went up confirming that the sales force were successful in landing new accounts and continue upselling existing customers. Distribution Network Support and Transportation Out both went up by $44,850.00 and $14,950 respectively from year 6 to 7, a 33% change. This constitutes a positive sign and confirming progress in sales.
With general and administrative expenses, it is observed that the company hiked up its research and development cost by $26,820 because of comments heard from other riders about how heavy and unreliable their bikes were. This motivated the company in building most durable, reliable, light weight bike frame and component set possible. And despite a 33.3% increase in sales, increase in utilities only amounted to a 3.8% change. Although operating expenses increases, it complimented the increase in net

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