Rjet Task 1

5149 Words21 Pages
A. Operational Strengths and Weaknesses A.1.a. Horizontal Analysis Comparative Income Statements Year 7 Compared to the Year 6, Year 7 was a much stronger year, with several strengths and weaknesses. Annual revenue indicates gross profit increased by 37.5% for a total of $447,000.00. This increase is calculated by computing the difference between the increased sales, and increase cost of goods. There are several possible causes for the large increase in revenue for Competition Bikes Inc., such as increased demand, supply, and marketing efforts or a combination of each. This year’s net sales prove to be one of Competition Bikes Inc. strengths. Analysis of the operating expenses reveals important information regarding operating decisions and their effects on operating income. Additional investment were made in four key areas; Advertising, Research and Development, Administrative Salaries, and Executive Compensation. The decision to invest in these areas, proved to be very profitable for the Competition, the percentage increase in Advertising and in R&D resulted in an equal percentage increase in gross profit. Increasing compensation for employees was a strong move for the company, decisions such as these motivate worker to perform more efficiently and productively. It is apparent by the 33.3 % increase in net sales a total of $1,495,000.00 that employees were more productive, and as a result more units were sold. Due to the increase in units sold, various other expensive natural increased, such as sales commissions, distribution network support, and transportation expenses. There were also expected increases in General and Administrative Expenses, which include employment taxes, and payroll services, this is a result of the increases in employee compensation. The net earnings of Competition Bike Inc. during this period showed a substantial increase over the
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