Task 1 Financial Analysis

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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…show more content…
Working capital is defined as a measure of both a company’s efficiency and its short-term financial appraisal. Working capital equals the current assets minus the current liabilities. Not the total liabilities and assets but the current ones. The working capital is used for whether a company has enough short-term assets to cover its short-term debt. Looking at the balance sheet for Competition Bikes Inc. we see that in year 6 our total current assets were $1,029,303 and our total current liabilities were $105,080. Our working capital for year 6 was $924,223. This is a great number because it means we have money left over from all the debt we needed to pay off for the year. Next question is what do we do with this cash? We need to improve our company and make it better with the money we earned. The working capital flows into a cycle called cash flow. This is a cycle into, around and out of a business. This is the business’s life and the task is to help keep the cash flowing to use the cash flow to generate profits. If a business is operating correctly then it should generate cash surplus. The faster this company expands the more cash it will need for working capital. There are two elements in the business cycle that absorb cash. Receivables and inventory. One specific method of increasing working capital is related to improving internal controls such as optimizing the systems used for maintaining accounts receivables. Providing a collection system…show more content…
The Sarbanes Oxley Act of 2002 is a bill that contains eleven sections as a reaction to a number of major corporate and accounting scandals. Section 302 contains two separate sections that came into effect, one civil and the other criminal. This has to do with disclosure controls. This act mandates a set of internal procedures to make sure that the accurate financial disclosures. Section 404 of this bill requires management and the external auditor to report on the company’s internal control on financial reporting. Management is required to produce a report of internal control as part of each annual exchange act report. Looking at the SOX requirements from Competition Bikes Inc, I notice a few things wrong. First off this paper states that management is responsible for ensuring the internal control processes. This is correct as in they are responsible to get the report but they should not be writing the report. Management should not be over this report in case of fraud or any other thing that could go wrong. They do need to make sure that the employees who are over this are doing their job and getting it turned in on time. It also states that they indicated no material weakness. This is wrong. There was a weakness in the internal controls. And last it states that the reporting is effective based on the criteria. This is also wrong. If we have a weakness then the criteria is not being effective. The requirements of the Sarbanes Oxley act have not

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