Wgu Financial Analysis Task 1

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1. Evaluate the company’s operational strengths and weaknesses based on the following: A1a. Horizontal Analysis When discussing the horizontal analysis of Competition Bikes Inc. I will compare three different years which will be years six, seven and eight. Using the horizontal analysis worksheet, we see that Competition Bikes had an increase in net sales between years six and seven by 33.3%. Then in years seven and eight Competition Bikes Inc. saw a decrease in net sales by 15%. Net sales in year eight were better than year six; sales did fall from the previous year. Next we will look at gross profits, which is the difference between net sales and the cost of goods sold. In our case, for years six and seven we see an increase of 37.5%, and then in years seven to eight there was a 16.3% decrease. This could be caused by either selling less, through an increase in the cost of goods sold, or a combination of the two. The gross profits come as no surprise when the net sales of decreased significantly between years seven and eight. The company attributes the loss in sales to the lack of sponsors for their professional rider customer base. Many of competition bikes customers are sponsored and with the current economy many sponsors are cutting back funding which will have a negative impact on sales for Competition Bikes Inc. Strengths Between years six and seven: Net sales increased 33.3% Cost of goods sold increased 32.8% Sales Commissions increased 33% Gross profit increased 37.5% Strength is shown here in between years six and seven as the company saw a significant economic increase in the overall company. This reflects highly positive growth. The company also saw a significantly increase in expenses such as advertising, sales commissions, transportation out and utilities which is shown as strength due to all of the positive growth between years six

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