Jet 2 Task 1

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Financial Analysis Summary Report
Task 1
Competition Bikes Incorporated
Lisa A Castro, MSW
Western Governors University

Horizontal Analysis (A. 1. a) A horizontal analysis can be defined as “the study of percentage changes in comparative statements” (Charles T. Horngren, 2008, p. 746). It is useful in determining a company’s financial stability. This section will analyze Competition Bikes Incorporated’s (CBI) percentage changes from years 6 to 7 and then 7 to 8. The report will include an analysis of CBI’s comparative income statement and balance sheet.
Between years 6 and 7 CBI’s Net Sales increased by 33.3% for a change of $1,495,000. The increase of 33% indicates strength for the company because it means that the
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This is a weakness for CBI because it could indicate that they are not collecting from their buyers in efficient or timely manner. When a company has large amounts of funds that are uncollected they do not have the cash on hand to purchase raw materials and pay expenses, which can negatively impact its ability to turn a profit. This will be examined further when the average collection period is analyzed later in this report. Between years 6 and 7 CBI’s Total Assets have increased by 2.2% for a change of $93,741. This shows strength in CBI because by increasing their assets they also increase their value. This can help instill confidence in current as well as potential shareholders.
Between years 6 and 7 CBI’s Accounts Payable and Notes Payable increased by 192% for a change of $128,820. This indicates a weakness as the company has more than doubled their debts between these two years. Significantly increasing debt can impact shareholder confidence, which could impact the market value of CBI stock. Between years 6 and 7 CBI’s Long Term Liabilities decreased by -5.6% for a change of negative ($105,000). This indicates strength for CBI as it demonstrates that the company as allocated monies to pay down their long-term debt further reducing their liabilities. Between years 6 and 7 CBI’s Retained Earnings increased by 17.4% for a change of $170,121. This is strength for CBI because it demonstrates its ability and willingness
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