Competition Bikes Task 1 Essay

5734 WordsMay 21, 201323 Pages
This report will provide a financial analysis and evaluation of Competition Bikes, Inc financial statements over a select range of financial years reported by the company. The financial analysis will assist the company in identifying strengths and weaknesses, with recommendations in areas of improvement to strengthen its financial position in hopes to induce overall efficiency of operations. Horizontal analysis results The horizontal analysis is a method used to analyze changes in the company’s financial health between years in values of dollars and percentages using data from the balance sheet and income statement. In the horizontal analysis a base year is set and then other years are compared to the base year. The horizontal…show more content…
With slow sales, the company had to keep some expenses flat, such as administrative salaries, web creation / maintenance and executive compensations. This is a weakness and as stated before, the company will need to increase sales to increase profits to raise its strength. On the balance sheet for years 7 and 8, the current assets increased in accounts receivables. This is probably due to slow pay and/or unpaid accounts receivables. The change between years 7 and 8 reported -15% with a decrease change of $107,640. Total assets change was -0.2% and this position reflects a financial weakness for the company. Cash and cash equivalents can be used to satisfy during this period, although there was a change of 348.2%, this increase could have been used for operating expenses. This is too much cash sitting idle and not working for the company. Competition Bikes can assess where to put this cash to work for the company. Net earnings increased from year 6 to year 7. There was a 313.40% increase in net earnings; this is a clear strength for the company in these astounding earnings as an indicator that the company was very profitable during this period. This data shows the company improved its bottom line and expenses did not exceed income. However, for years 7 and 8 the change in net earnings was reported at -81.6% with a decrease change of $218,392.

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