...[pic]RJET Task 1 | | | | | | | |Help on this Page | |Directions | | | |SUBDOMAINS: 326.1 - MANAGING INTERNAL COST & CONTROLLING FINANCES | |326.2 - MANAGING CAPITAL AND FINANCIAL ASSETS | |326.4 - MANAGING ENTERPRISE RISK & CONTINUITY | |329.4 - MANAGING OPERATIONS | | | |Competencies: 326.1.1: Financial Analysis - The graduate analyzes and benchmarks financial statements, evaluates company | |performance, identifies...
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...Introduction: Competition Bikes Inc. has retooled and is making both the CarbonLite and the Titanium frame bikes. The company vice president directed that a cost study be conducted, and an activity-based costing analysis was undertaken in one of the company plants. After the study, a breakeven analysis was completed along with target profit projections. For this task, you will be using the attached “Competition Bikes Inc.” storyline. Task: A. Prepare a summary report to the vice president of the company in which you do the following: 1. Recommend whether the company should change its costing method to activity-based costing. Note: The discussion should include sufficient financial justification for the recommendation made. (Provide an appropriate recommendation, with sufficient support, of whether the company should change its costing method to activity-based costing) 2. Based on an evaluation of cost-volume-profit, do the following: a. Analyze the breakeven point for Competition Bikes Inc. with regard to sales units and sales dollars for both CarbonLite and Titanium bikes. (Provide a plausible analysis, with sufficient support, of the breakeven point for Competition Bikes Inc. with regard to sales units and sales dollars for both CarbonLite and Titanium bikes based on an evaluation of cost-volume-profit.) b. Prepare a summary report that describes the impacts to the breakeven point if company management...
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...JET2 Financial Analysis Task 1 Competition Bikes, Inc. Submitted by: Michelle Beacham Competition Bikes, Inc. is a manufacturer of bicycles for professional and other highly accomplished riders. The bicycle produced is a light weight, shaft driven bicycle that is custom made to fit each cyclist. It has been extremely popular among professional riders; however, recently sponsors have reduced funding to the riders causing a decline in sales volumes. This summary will be evaluating the strengths and weaknesses of the Competition Bikes, Inc., analyzing the working capital of the company, evaluating the internal controls, and Competition Bikes’ compliance with the Sarbanes-Oxley Act. Evaluation of the strengths and weaknesses The first evaluation of strengths and weaknesses of Competition Bikes, Inc. will be a horizontal analysis of the income statement and balance sheet. A horizontal analysis is a comparison of financial information across a particular time period. A comparison of the periods is completed based on a historical base period. For instance, we could compare sales for the current year as compared to the prior year. Each significant variance is investigated to determine the cause of the fluctuation (Accounting Tools, 2015). Gross profit is the difference between “Net Sales” and “Cost of Goods Sold”. Gross profit is up 37.5% in year 6 with a significant decline of 16.3% in year 7. The decline in year 7 is directly attributable to the decline in sales...
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...Summary Report: Operations Evaluation: Task 1 Courtney Nelson Western Governor’s University: Financial Analysis 1. Evaluation of Competitive Bikes, Inc.’s Strengths and Weaknesses based on analysis a. Horizontal Analysis Results When viewing a horizontal analysis statement it is important to know that the horizontal analysis is the study of the percentage of changes in comparative statements (Horngren, pg.746). Companies use horizontal analysis to determine the change in the percentage of sales, expenses, and net income. This number will determine if the company is increasing or decreasing amounts in the carious assets. The horizontal analysis evaluates the percentage of revenue that a company either increased by or decreased by. Competitive Bikes, Inc. decreased their amount of revenue by -16.3% in years seven and eight. In years six and seven, Competitive Bikes, Inc. increased their revenue by 37.5%. These figures show that something went wrong during this time period that cause Competitive Bikes, Inc. to lose a large percentage of revenue. The revenue can also be thought of as the net sales, making this an area of concern for Competitive Bikes, Inc. The operating expenses also took a hit on the horizontal analysis evaluation. The company went from a 33% in years six and seven to a -14.9% in years seven and eight. The company spent more money on advertising, transportation out, distribution network support, and sales commision in year seven, as compared...
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...A.1 Throughout this paper, the “Competition Bikes Inc. Storyline” case study will be used to prepare a summary report based on the evaluation of the company’s operations. The objective will be to evaluate the company’s operational strengths and weaknesses based on the following: a. Horizontal analysis results b. Vertical analysis results c. Trend analysis results d. Ratio analysis results As defined by Business Dictionary (2014) Horizontal Analysis is ” Comparative study of a balance sheet or income statement for two or more accounting periods, to compute both total and relative variances for each line item.” Competition Bikes Inc. will be analyzed in each area in regards to years 6, 7, & 8. Analyzing the strengths and weakness of the operations throughout the discussed years will take place throughout the assignment. The Strengths of Competition Bikes Inc. will first be analyzed and discussed. Firstly, Revenue will be analyzed for years 6 & 7, in which there are strengths concerning Net Sales. From year 6 to 7, Net Sales increased by $1,495,000, a 33.3% increase for Competition Bikes Inc. Year 7 was a much stronger year concerning Net Sales for Competition Bikes Inc., compared to year 6. A second strength within the Horizontal Analysis is the Cost of Goods Sold for year 7, compared to the previous year. The COGS increased to $1,048,000, which is a 31.8% increase. This is significant due to the fact that the Net Sales enjoyed a much larger increase compared to the Cost...
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...Financial Analysis- JET 2 Task 3 Krista Yunck, MBA MGMT & STRAT 11/01/2012 Student ID: 000285809 My Mentor: Rose Sklar 925-759-2061 or kyunck@wgu.edu Tucson, AZ- Arizona A1. Capital Structure Capital structure is defined as the mix of a company’s short-term debt, and long-term debt as well as their common and preferred equities. For Competition Bikes Inc. capital structure is how they finance their overall operations as well as how they finance their overall growth. Competition Bikes has debt from long-term notes payable and working capital. While there equity lays within their common and preferred stock as well as their retained earnings. Capital structure needs to be implemented into Competition Bikes Inc., since they want to expand their business into Canada. By integrating a capital structure approach they will be able to ensure adequate funding and afford future stability of the company. The company has come up with five approaches in order to generate the capital required for this expansion. The first approach is to issue 9% bonds for 100% of the financing needs. The second approach is to issue common stock for 50% and preferred stock for 50%. The third approach is to issue 5 year 9% bonds for 20% and common stock for 80%. The fourth approach is to issue 5 year 9% bonds for 40% and common stock for 60%, and the fifth and final approach is to 5 year 9% bonds for 60% and common stock for 40%. After reviewing all five possible capital...
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...Horizontal Analysis: To adequately understand what we are looking at it is helpful to understand the true meaning of horizontal analysis. In Webster’s new world dictionary horizontal is defined as “1. Parallel to the plane of the horizon; not vertical. 2. Flat and even; level.” (Simon and Schuster Inc., 1990) Analysis is then defined as “1. A breaking up of a whole into its parts to find their nature, etc. 2. A statement of the results of this…” (Simon and Schuster Inc., 1990) Therefore in regards to the horizontal analysis we are basically looking across the balance sheet or statement. For this task we are given a comparative income sheet. This document lists years 6 through 8. The information on the sheet gives us a look at how the company is doing financially, and what the company is doing in regard to sales. Looking at the horizontal analysis for Competition Bikes, Inc. you can tell see that Competition Bikes, Inc. has experienced a decline of their net sales. It is fairly certain that this decline is a direct correlation to the downturn in the economy. Competition Bikes, Inc. remains upbeat believing that sales will increase during the three year future projections, but they are expecting the new high to fall below the sales figures they saw in 2007. Even though Competition Bikes, Inc. saw their sales decrease, when the cost of goods sold is formulated as a percentage of net sales we see that it remained steady at 73%. This is a good indicator that the labor budget and inventory...
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...Horizontal Analysis: To adequately understand what we are looking at it is helpful to understand the true meaning of horizontal analysis. In Webster’s new world dictionary horizontal is defined as “1. Parallel to the plane of the horizon; not vertical. 2. Flat and even; level.” (Simon and Schuster Inc., 1990) Analysis is then defined as “1. A breaking up of a whole into its parts to find their nature, etc. 2. A statement of the results of this…” (Simon and Schuster Inc., 1990) Therefore in regards to the horizontal analysis we are basically looking across the balance sheet or statement. For this task we are given a comparative income sheet. This document lists years 6 through 8. The information on the sheet gives us a look at how the company is doing financially, and what the company is doing in regard to sales. Looking at the horizontal analysis for Competition Bikes, Inc. you can tell see that Competition Bikes, Inc. has experienced a decline of their net sales. It is fairly certain that this decline is a direct correlation to the downturn in the economy. Competition Bikes, Inc. remains upbeat believing that sales will increase during the three year future projections, but they are expecting the new high to fall below the sales figures they saw in 2007. Even though Competition Bikes, Inc. saw their sales decrease, when the cost of goods sold is formulated as a percentage of net sales we see that it remained steady at 73%. This is a good indicator that the labor budget and inventory...
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...Jim Crosby Task 2, Financial Analysis A1 Discuss budgeting areas that raise concern in the budget planning. There are several areas of budgetary concern within the proforma financial statements. Some of the prominent areas of concern are in the overall sales numbers. Units expected to be sold is 3510 for the year of nine of CB. However, year 8 had sales of $5,083,000 which was down 15% from the previous year, yet in the proforma statements for year nine, total sales are projected at $5,227,716. One wonders how this might occur given that administrative and executive salaries have remained the same. If indeed more units sold is to be expected for year nine, then overhead costs should have risen as well as the rest of the expenses for the operation. Other areas of concern are the current price per unit of the bicycle which in the proforma statement is $1495.00 per unit. This price needs to be increased by 1% bringing the actual price to $1509.95. This increase will bring the projected gross sales figure to $5,299,924.50. This added income of $52,277.15 will add to the bottom line of the operation. This added revenue to another area of concern in the expenses proforma. This area is the total direct labor hours needed in the assembly of raw materials. The current number is 52,650 and these ...
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...Financial Analysis Task 3 A1. Competition Bikes is considering expansion into Canada. Before this consideration can be made it is essential to review the capital structure and ensure operations maybe fully funded. Based on past financial standing Competition Bikes has long term debt that may cause concern. Below is a Chart displaying potential earning per common stack share based on Earnings before interest and tax figures from the Canadian Budgeted earnings for Year 9-13. Looking here you can see the optimal Capital Structure for the moderate Canadian budgeted earnings. The goal is to determine which source of alternative for capital sources will fit Competition Bikes Best. Earnings per common stock share refers to the profitability of a company by placing a value on their stock (Investopedia 2013). When reviewing the information above it is recommended that Competition Bikes Inc. issues a 50% preferred stock with a 5% dividend interest and $50 par and a 50% Common stock | 12% Bond | 50% Preferred (5%,$50par) and 50% Common Stock | 20% 12% Bonds and Common Stock | 40% 12% Bonds and Common Stocks | 60% 12% Bonds and Common Stock | | Earnings Per Common Stock Share | 0.002 | 0.027 | 0.0027 | 0.023 | 0.017 | Year 9 | | 0.009 | 0.032 | 0.032 | 0.028 | 0.023 | Year 10 | . | 0.019 | 0.039 | 0.038 | 0.035 | 0.031 | Year 11 | | 0.031 | 0.048 | 0.046 | 0.043 | 0.04 | year 12 | | 0.042 | 0.057 | 0.054 | 0.052 | 0.049 | Year 13 | | 0.103 | 0.203 | 0...
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...Task 2, Financial Analysis A1 Discuss budgeting areas that raise concern in the budget planning. There are several areas of budgetary concern within the proforma financial statements. Some of the prominent areas of concern are in the overall sales numbers. Units expected to be sold is 3510 for the year of nine of CB. However, year 8 had sales of $5,083,000 which was down 15% from the previous year, yet in the proforma statements for year nine, total sales are projected at $5,227,716. One wonders how this might occur given that administrative and executive salaries have remained the same. If indeed more units sold are to be expected for year nine, then overhead costs should have risen as well as the rest of the expenses for the operation. Other areas of concern are the current price per unit of the bicycle which in the proforma statement is $1495.00 per unit. This price needs to be increased by 1% bringing the actual price to $1509.95. This increase will bring the projected gross sales figure to $5,299,924.50. This added income of $52,277.15 will add to the bottom line of the operation. This added revenue to another area of concern in the expenses proforma. This area is the total direct labor hours needed in the assembly of raw materials. The current number is 52,650 and these 2 hours need to be reduced by 5%. This will reduce the total hours to, 50,017.5 with a commensurate reduction in expenses to $1,000,350.00. This would add another $52,750.00 to the bottom...
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...Introduction: JET2 Task 2 Summary Report for Budgetary Planning Competition Bikes, Inc. will be reviewed for its various budgets and for its budgetary planning. Budgets are the main planning tool in all businesses that are used by managers to executive management to make decisions for the company. Cash flow is the bloodline of any organization’s operation including operating activities that determine how much cash stays in the organization called revenues and how much is paid out as an expense or liability. Competition Bikes Inc. makes bicycles for professional riders who compete in road races such as triathlons and biathlons. The bikes have an extraordinary success rate and the product consistently finishes in the winners bracket approximately sixty percent of the time. However, due to the recent economic situation Competition Bikes, Inc. has experience a recent decline of approximately 15 percent in its bicycle sales which the trend expecting to continue for the next thirty six months. This review will provide an analysis and provide recommendation for improving budget planning for the company in a summary report Task: Note: submit a copy of your Excel workbook when submitting your JET2 Task 2 work. . A. Prepare a summary report in which you do the following: 1. Discussion of budgetary areas that raise concern in the budget planning. One of the biggest issues when creating budgets is that there is no absolute way of knowing what next year...
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...through several analysis breakdowns that show not only the year by year changes but the trends that cause the changes as well. In this report a financial analysis of the Competition Bikes, Inc. will be conducted covering; horizontal analysis, which is a comparative study of a balance sheet or income statement for two or more periods, to compute both total and relative variances for each line item (businessdictionary.com, 2014). A vertical analysis or the technique for identifying the relationship between items in the same financial statement by expressing all amounts as the percentage of the total amount taken as 100 (businessdictionary.com, 2014) will also be shown. In a balance sheet, for example, cash and other assets are shown as a percentage of the total assets and, in an income statement, each expense is shown as a percentage of the sales revenue. Financial statements using this technique are called common size financial statements. (businessdictionary.com, 2014) In order to assist the company in determining the possibilities over the next few years, included in this report will be a trend analysis which is a method of time series data (information in sequence over time) analysis involving comparison of the same item (such as monthly sales revenue figures) over a significantly long period to (1) detect general pattern of a relationship between associated factors or variables, and (2) project the future direction of this pattern (businessdictionary.com, 2014). The...
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...Task: 3 A. Prepare a summary report in which you do the following: A1. Recommend a capital structure approach that maximizes shareholder return. Capital Structure: “Capital structure is the manner in which a firm’s assets are financed; that is, the right-hand side of the balance sheet. Capital structure is normally expressed as the percentage of each type of capital used by the firm debt, preferred stock, and common equity.” (Capital Structure Decision, 2002) Capital structure is a mix of debt, preferred stock, and common stock to which Competitive Bikes will plan to finance its company. The recommendation for Competition Bikes pertaining to their capital structure is the alternative of 50% Preferred and 50% Common Stock. With reviewing the numbers and the EPS as outlined in the schedule below (exhibit 3-1) this is the best alternative to strengthen Competition Bike financial position with strong capital structure while maximizing shareholders’ value. Although a solid capital structure will maximize a shareholders value and increase the value of the company, it is also important to Competition Bikes as with any other business, is not to lose site and focus on what is also important to the consumer; which is the quality of the product and customer service. There are two component of total capital which needs to be analysis; debt capital and equity capital. Ø Debt Capital: Is long term debt such as bank loans; Debt Capital is typically...
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...Summary Report for Competition Bikes Inc., Horizontal Analysis The income statement from year 6 to year 7 sales went up by 33% while product costs, went up only by 31%. Selling expense (33%) and general operating expense (20%) both increased from year 6 to year 7. These increases did not offset the increase in sales, but help contribute to having greater profits in year 7 than the prior year. Net income grows by 313%. The balance sheets also show a growth in assets, with total assets increasing by 2.9%. Liabilities grow slowly, only increasing by 1.2% which is indicator of positive growth for Competition Bikes, Inc. When review the income statement from year 7 to year 8 sales went down by 15 percent, product costs went down by 14 percent and selling expense decreased by 15 percent, however general operating expense increased by 1 percent. The decrease in product cost and selling expense were not low enough to offset the decrease in sales resulting in a decrease in net income by 82%. The balance sheet shows total assets decreasing by -0.1%, but with liabilities also decreasing by -1.9% it offsets the impact of the assets decline. Vertical Analysis The vertical analysis shows the change between items of the balance sheet from year to year. Year 6 current assets represent 24.5 cents out of every asset dollar of the company and total liabilities are 47.5%. In year 7 current assets increased to 31.9 cents. This evidenced by the fact...
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