Rjet Task 1
Financial Analysis
Task One
A 1a Horizontal analysis is when an individual looks at the income statement of a company and compares one year to the other to see what kind of percentage it has increased or decreased within the different departments in a company for any given time period. When looking at Competition Bikes (CB) and performing a horizontal analysis, we would take a look at first year 6 and year 7. Between year 6 and 7 there was an increased net sales of 33.3%. This means that from year 6 to year 7 there was a great increase. This means that the customers were happy with the product being sold, and this is a sign of strength within the company. It was a profitable year.
For year 6 and 7 the cost of goods sold also went up 31.8%. This number is to be expected. Since the net sales went up, obviously the cost of goods sold will also go up. This also means that CB’s purchasing department was able to keep the cost of goods sold down. If the net sales had been lower than the cost of goods sold, then there would have been a problem. The best numbers to look at when comparing year 7 to year 6 is the gross profit. The profit difference during these two years was 37.5% that is a good gross profit. This means several things, the first being that the company grew, that the customers were happy with the product, and that management did a good job in promoting its product.
The operating expenses shows why there was such a great increase in gross profit. Their advertisement department spent 37.5% more on year seven than they did on year six. This simply means that CB spent a lot of money in advertising. The advertising department had more money to spend because the company made more money that year.
Sales commissions also were up 33.3% in year 7 from year 6. This is a positive trend for CB because the sales personnel should be awarded commissions from having such a high year in sales. This will also ensure that the sales department will keep its
Task One
A 1a Horizontal analysis is when an individual looks at the income statement of a company and compares one year to the other to see what kind of percentage it has increased or decreased within the different departments in a company for any given time period. When looking at Competition Bikes (CB) and performing a horizontal analysis, we would take a look at first year 6 and year 7. Between year 6 and 7 there was an increased net sales of 33.3%. This means that from year 6 to year 7 there was a great increase. This means that the customers were happy with the product being sold, and this is a sign of strength within the company. It was a profitable year.
For year 6 and 7 the cost of goods sold also went up 31.8%. This number is to be expected. Since the net sales went up, obviously the cost of goods sold will also go up. This also means that CB’s purchasing department was able to keep the cost of goods sold down. If the net sales had been lower than the cost of goods sold, then there would have been a problem. The best numbers to look at when comparing year 7 to year 6 is the gross profit. The profit difference during these two years was 37.5% that is a good gross profit. This means several things, the first being that the company grew, that the customers were happy with the product, and that management did a good job in promoting its product.
The operating expenses shows why there was such a great increase in gross profit. Their advertisement department spent 37.5% more on year seven than they did on year six. This simply means that CB spent a lot of money in advertising. The advertising department had more money to spend because the company made more money that year.
Sales commissions also were up 33.3% in year 7 from year 6. This is a positive trend for CB because the sales personnel should be awarded commissions from having such a high year in sales. This will also ensure that the sales department will keep its