Balance Sheet and Company Essay example

Submitted By egypt2006
Words: 4312
Pages: 18
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Emily Wadman
Financial Analysis
Task 1

Competition Bikes, Inc. is a company that makes professional bicycles for races, biathlons, and triathlons. In this report I will be creating a summary based on the evaluation of the company’s operations.
1a. Horizontal analysis compares the financial amounts throughout the years of a company. I have compared the income statements and the balance sheets for the past three consecutive years. We are going to look at year 6,7, and 8. The net sales for years 6 and 7 are considered strength. They increased by 33.3%. We sold over 1,495,000 bikes in year 7 than we did in year 6. This is a huge strength and positive year for the company. Because of the increase in sales it helps the entire company from our employees to advertising. Looking at the net sales for years 7 and 8 we have a 15% decrease. This is a weakness for the company. We dropped more than 897,00 bikes in one year. We need to look into this and see what caused the drop and see what we can do to fix it in the future. Next looking at the advertising sale expenses for year 6 and 7 have an increase of 37%. This could be considered strength and also a weakness. Years 7 and 8 have a decrease of 16%. It can be considered a weakness because this could be a reason why sales were down in years 7 and 8. We did not spend as much money advertising our company and it could have resulted in a decrease in sales. It can be considered strength because we saved money on advertising sales for the second year. When sales are up for the company we can look at ways to save money on certain areas like advertising. I do think it was good to save some money in advertising but at the same time it can hurt the company by not getting our name out there for people to see to raise our sales. For years 6 and 7 the website creation and maintenance for the years was $6,000. For years 7 and 8 it was $6,000. Nothing had changed in the three years. This can be strength and a weakness. It is a strength because you are not spending any more money in keeping up with your websites. But because we had a decrease in sales in years 7 and 8 this could be a weakness and it could have hurt the company. Our customers may not have liked our website and what it has to offer. It is something to look into and see if we should be spending more money in this area to increase our annual sales. Next in the income statement we are going to look at the cost of utilities. From years 6 to 7 we had an increase of 3.8%. Our second year was our biggest year so far and we had the most sales. Even though this percent increases our costs it is still considered a strength because of how much business we had our second year. We spend $5,000 more the second year than the first. With how much time we put into building bikes and increasing our sales, that is a good number. Looking at years 7 and 8 we had an 11.1% increase. We spent more than $15,000 this year. This number is considered a weakness. Our sales have dropped this year significantly and we spent more money on utilities when we probably didn’t need to be. We could have moved to a bigger building to accommodate our increase in sales the second year and then we did not end up selling as much inventory as we expected. Many reasons could have played into this increase. We need to make sure we are watching all our expenses and make smart moves by decreasing our utility costs if our annual sales decrease. Analyzing the balance sheet for years 6,7, and 8 have many strengths and weaknesses. If we start to look at the accounts receivable net for the years 6 and 7 we have a big strength. Accounts receivable is the payment from a business to its customer/clients for goods supplied and services of the customer’s order. We had an incline of 164.3%. We increase our company’s profits this year. Our bike sales skyrocketed. The years from 7 to 8 we had a decline of -15%.
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