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Operations Evaluation

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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 to years six and eight. The fact that they spent more money on sales commission and transportation out, shows that the company sold more bikes in this year, than in the other two. Something that may have attributed to this increase in sales may have been the increase in the amount of dollars spent on advertising. This is an area of concern, because typically if you are experiencing larger

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