Task 1 Financial Analysis Paper

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Financial Analysis Task 1 Erin A Downey Financial Analysis – WGU September 21, 2013 Financial Analysis Task 1 A1a. Horizontal Analysis Horizontal analysis is “the study of percentage changes in comparative statements,” (Horngren, 2009). Performing this analysis gives the reviewer the ability to see changes in expenses and revenue in a way that has more meaning than simple changes in amount. This analysis gives the ability to see how the change in amounts is related. Income Statement 1. Net Sales a. Net sales increased from year 6 to year 7 by a total of $1,495,000. This translates to net sales being 33.3% higher in year 7 than year 8. The change in net sales indicates a growing company with major successes. b. The…show more content…
The first way to improve working capital is to make the excess liquid funds work for the company. These funds should be invested back into the company. This can be accomplished by reducing long-term liabilities with high interest rates such as the mortgages on facilities. The second is to manage the inventory held by the company. Currently Competition Bikes purchases inventory for production the month before it goes to the production line. To ensure that inventory is being used in a smart way, the company should negotiate terms with fewer manufacturers to purchase materials on consignment. This would allow the materials to be stored at the manufacturing facility to be available on demand without the necessity of carrying that inventory in the books. The inventory would then be purchased and paid for at the time of use. This reduces the carrying costs of the inventory that is ordered as well as insuring that unused items are not held from month to month. A third way to increase working capital is to realign the billing and payment schedules for the company. Currently products are invoiced to customers at the end of the month with terms of net30. Suppliers invoice the company at the end of the month with terms of net15. This disparity of terms can impact working capital as money flows out in the middle of the month but does not flow in until the end of the month. To…show more content…
In the stated policy there is no mention of inspection of the process for receiving the delivery. When there is no system in place to ensure that the items ordered are the items received there is no control over the overall costs of materials. To gain this control there should be an inspection done of the materials against the bill of lading provided by the shipper. Once the bill of lading is signed off on, the goods receipt should be given to the accounting department with a copy of the purchase order. This will insure that when the invoice is received by the accounting department they will be able to match the items on the invoice to the items received. This will ensure that the items paid for are the items that were

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