Jet2 Task 1

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JET2 Financial Analysis Task 1 – Competitive Bikes, Inc. Rob Baxter May, 20, 2013 ------------------------------------------------- COMPETITVE BIKES, INC. A1a. Horizontal Analysis Horizontal Analysis is a “Comparative study of a balance sheet or income statement for two or more accounting periods, to compute both total and relative variances for each line item.”1 Horizontal Analysis may look at whether a company’s earnings or expenses have gone up or down over a certain period. It can be used to help analyze investment decisions or to determine financial health. ------------------------------------------------- INCOME STATEMENTS REVENUE Net Sales increased nicely from year 6 to year 7 by $1,495,000.00, or 33.3%. This shows a strong increase. From years 7 to 8, net sales decreased by $897,000.00 or -15%. This exhibits weakness. Cost of Goods Sold increased from year 6 to year 7 by $1,048,000.00, or 31.80%. This is normal when sales increase and it is positive that the percentage is lower than sales. From year 7 to 8 Cost of goods sold decreased by $630,400.00 or -14.5% from 7 to 8. This reflects the reduction in sales. It is good that the percentage decrease was lower than sales decrease. Gross Profit increased from year 6 to 7 by$447,000.00, or 37.5%. This is a strong move. Gross Profit decreased from year 7 to 8 by $266,600.00, or -16.3%. This is a sign of weakness. It should be noted that the percentage reduction is larger the percentage reduction in sales and cost of goods sold. OPERATING EXPENSES Selling Expenses Advertising was up from year 6 to year 7 by $8,940 or 37.5%. From year 7 to year 8 operating expenses were down $5,332 or -16.3%. This is weak and raises questions about why management would decrease advertising so much. Gross Profit was actually down at the same rate and the reduction in advertising suggests a direct

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