Wgu Finance Task 1

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Financial Analysis Task 1 Western Governors University Horizontal Analysis of Competition Bikes, Inc. In a horizontal analysis of years seven and eight it appears that though there was a reduction in net sales the cost of goods sold and gross profit all reduced at similar rates which indicate that as sales dropped overall materials cost did as well and that inventory was well managed. Selling expenses also change consistently which indicates the company made smart decisions around selling their products as demand declined. Lastly, the long term liabilities reduced which shows that the company did not take out further debt to finance operations. A couple of points to look at include the fact that utility expense increased 11% year over year. Considering the fact that production, sales and selling expenses were down this could indicate inefficiency in the company. The company also significantly cut back in research and development. In the previous period this was one of the fastest growing expenses. This may have been for any number of reasons, however if this was cut simply to conserve cash it could result in slower growth in the long term. The cash and cash equivalents have grown by 348.2% which is alarming. This is an indication that the company is not investing their cash appropriately. This cash could have been invested in the aforementioned research and development to keep the business competitive in the long term. A few smaller points that are still worth mentioning are that the receivables have dropped 15%. This could be a sign that the company has stopped extending credit at the level they once were and are missing out on credit sales. Lastly, payables have increased 33% which means the company could be losing out on discounts for paying on time, or worse yet incurring charges for late payments. Given the amount of cash on hand the

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