TASK 1 – FINANCIAL STATEMENT ANALYSIS AND CONTROLS
Requirements for Task 1:
A. Prepare a summary report in which you do the following:
1. Evaluate the company’s operational strengths and weaknesses based on the following: In order to evaluate company’s operational strength and weaknesses accurately it is important to have access to more than one year worth of data. The company, of course, will not be evaluated on the basis of couple of ratios, it is very important to analyze all the available information to put pieces of puzzle together to see the overall impression of the company and its attractiveness to creditors, investors and stockholders.
To be able to compare company’s performance we will be evaluating three
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Let’s refer to Balance Sheet and perform horizontal analysis of it. If we compare assets numbers for 3 years we will notice that cash and cash equivalent is at its highest at the current year, was lowest at the year 7 and somewhere in-between during the year 6. Cash and its equivalents have more than tripled with increase of impressive 348% between year 7 and year 8. Bottom line on current assets: Competition Bike’s comparative balance sheet shows growth in assets, with total assets increasing by impressive of 31.5% from year 6 to year 7 and by slightly less impressive 16.5% from year 7 to year 8. It is strength when company grows in assets. What the company should be doing is ensuring that excessive working capital is detected on time and converted into short term investments. Raw materials inventory show positive change from year 6 to year 7 - a drop from $104,480 to $88,808. From year 7 to year 8 number increasing from $88,808 to $91,573 which is bad, it is the indication of weakness as inventory remains unused and it results in additional cost. Cost of property and equipment (land, plants, offices, assets, furniture and equipment) remains unchanged throughout 3 years. With depreciation rating at 100% from year 6 to 7 and then 50% from year 7 to 8, which is expected, company’s net profit and equipment shows decrease by $270000 both years. One trend that we see by throughout both balance sheet and comparative income