Competition Bikes Task 1 Essay
Horizontal analysis results
The horizontal analysis is a method used to analyze changes in the company’s financial health between years in values of dollars and percentages using data from the balance sheet and income statement. In the horizontal analysis a base year is set and then other years are compared to the base year. The horizontal …show more content…
Vertical analysis results
Vertical analysis is a process of financial analysis to see relative annual changes based on major accounts of data from the balance sheet and income statement. On the income statement for Competition Bikes’ composition of sales (cost of goods sold and gross profit) from year 6 to year 7 there was a decrease in cost of goods sold by -8% and an increase in gross profits by 8%. Then in years 7 and 8 there was a minimal increase of 4% in cost of goods sold and decrease of -.4% in gross profits. Although there is some fluctuation between the years, there are no alarming spikes and this is strength for the company. Throughout all three years the total selling expense remained flat. In addition, each year cost of goods sold remained at an average of 73% of net sales leaving an average of 27% in gross profit from sales.
On the balance sheet cash and cash equivalents in year 6 and year 7 declined 4% indicating a weakness in this are for the company. In year 7 most of the current assets consisted of money owed to the company from net account receivables at 16.7%,