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Aac Part C

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| AAC Part C | | |

Analysis of the financial position of Bicycles Inc compared with Two-Wheelers Inc. |

Table of Contents Introduction 3 Company Comparison 3 Common Size Financial Statements – Income Statement 3 Common Size Financial Statements – Balance Sheet Assets 3 Common Size Financial Statements – Balance Sheet Liabilities and Stockholder’s Equity 4 Liquidity Financial Ratios - James 5 Profitability financial ratios - Shane 5 Long term solvency ratios - Michelle 5 Conclusion – Michelle 5 Appendix A – Common Size Statements 6 Appendix B – Financial Ratios 12

Introduction
We will be analyzing the common size statements and various financial ratios for Bicycles Inc and Two-Wheelers Inc to determine the financial position and profitability of each company. We will be discussing how the various financial decisions made by each company cause influence the common size statements and financial ratios to determine if the difference is valid. These decisions include Bicycles Inc’s choice to use a bad debt allowance, LIFO, straight line depreciation for building, accelerated depreciation for equipment, capital lease. Two-Wheelers Inc’s decided to write off bad debt as they become aware of them, FIFO, straight line depreciation for the building and equipment and not negotiate a capital lease. All of these decisions had direct impacts on their financial statements and therefore their financial position.
Company Comparison
Common Size Financial Statements – Income Statement
Common size financial statements are especially useful when comparing companies of different size. All items on the Income Statement are expressed as a percentage of sales. It will be best to look at the total items rather than each individual item. This will allow us to determine the profitability of each company. Cost of goods sold (COGS) for Bicycles Inc. is

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