Rjet Task 2-Financial Analysis

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Introduction: JET2 Task 2 Summary Report for Budgetary Planning

Competition Bikes, Inc. will be reviewed for its various budgets and for its budgetary planning. Budgets are the main planning tool in all businesses that are used by managers to executive management to make decisions for the company. Cash flow is the bloodline of any organization’s operation including operating activities that determine how much cash stays in the organization called revenues and how much is paid out as an expense or liability.

Competition Bikes Inc. makes bicycles for professional riders who compete in road races such as triathlons and biathlons. The bikes have an extraordinary success rate and the product consistently finishes in the winners
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In our case, the Operating Income for Year 9 is a negative $45,820. It is difficult to run a business with negative income and pay the necessary debts. In a declining market, the Sales projections should reflect this change in the market and the Sales should not be projected as increasing year to year in this type of market.

The next concern is the Year 8 Ending Accounts Receivable in the amount of $609,960 which is the total amount received from Year 8 Sales projections. Once again the Sales projected and the Accounts Receivable shows a wide margin of difference. The Total Budgeted Revenues was $5,247,450 and the Accounts Receivable was $629,694. This equates to only 12% of the Actual Sales being collected. The Accounts Receivables will need a serious evaluation as to why the collections are this low. It is important for this business to increase the Aging Accounts owed to the organization in order to increase the accounts receivable. Penalties may need to be sent to the vendors for late payments and the finance staff will need to be held accountable for poor internal control practices. Accurate Net Sales Projections will need to be adjusted for this change in the overall market decline. 2. Evaluate the flexible budget and its variances. A Flexible Budget is a type of budget that changes due to various fluctuations or changes at any point in time of the normal business cycle and there are always funds available. This allows for
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