financial analysis task 1 wgu
Task 1
Horizontal analysis
Horizontal analysis allows side by side comparisons on a year to year basis to determine the performance from one year to the next. The company decides on standards to compare the results of the analysis. Standards are researched by checking competitors, internet research of general industry guidelines or standards created from past experience in the company.
The Company states in the summary that they attribute the net sales decrease in sales to the economy. The primary buyers of the bikes are professional bikers and with the sponsors of these professionals backing off the sales for this company took a direct hit. Competition Bikes Inc, also decreased advertising between years 7 and 8. This looks as though the company is marketing to a specific audience and when that audience dried up so did the sales of the bike. The company needs to put money to the Research and Development department to search for a new audience or try to create a new version of their product and market it to a broader audience.
Revenue is the cost of goods sold subtracted from the net sales. In Years 6 and 7 the competition Bike Company had a 37.5 % increase in revenue. However, in years 7 and 8 the company had a 16.3% decrease in revenue. Competition Bikes has a decline in sales that is directly related to the decline in the economy. Even though the sales are expected to increase they are still not projected to meet the initial level of sales the company experienced. The use of more marketing may increase sales.
The labor and inventory have not increased but utilities have increased, this may be due to an increase of energy costs.
After reviewing the General and Administrative Expenses I have noted the increase in the first year by 21% and 1.2% between years 7 and 8. Administrative salaries were increased by 21% between years 6 and 7. This needs investigated as the sales have decreased, where are the additional costs of administrative expenses
Horizontal analysis
Horizontal analysis allows side by side comparisons on a year to year basis to determine the performance from one year to the next. The company decides on standards to compare the results of the analysis. Standards are researched by checking competitors, internet research of general industry guidelines or standards created from past experience in the company.
The Company states in the summary that they attribute the net sales decrease in sales to the economy. The primary buyers of the bikes are professional bikers and with the sponsors of these professionals backing off the sales for this company took a direct hit. Competition Bikes Inc, also decreased advertising between years 7 and 8. This looks as though the company is marketing to a specific audience and when that audience dried up so did the sales of the bike. The company needs to put money to the Research and Development department to search for a new audience or try to create a new version of their product and market it to a broader audience.
Revenue is the cost of goods sold subtracted from the net sales. In Years 6 and 7 the competition Bike Company had a 37.5 % increase in revenue. However, in years 7 and 8 the company had a 16.3% decrease in revenue. Competition Bikes has a decline in sales that is directly related to the decline in the economy. Even though the sales are expected to increase they are still not projected to meet the initial level of sales the company experienced. The use of more marketing may increase sales.
The labor and inventory have not increased but utilities have increased, this may be due to an increase of energy costs.
After reviewing the General and Administrative Expenses I have noted the increase in the first year by 21% and 1.2% between years 7 and 8. Administrative salaries were increased by 21% between years 6 and 7. This needs investigated as the sales have decreased, where are the additional costs of administrative expenses