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Rjet Task 1

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RJET 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:
a. Horizontal analysis results

Horizontal analysis is to determine dollar and percentage changes by comparing financial statements. (Investopedia.com, 2011)

Between years 6 and 7, Competition Bike Inc.’s net sales increased 33.3% at $1,495,000. Between years 7 and 8, net sales of the product decreased 15.0% with a loss of $897,000.
Gross profits increased 37.5% at $447,000 between years 6 and 7, but decreased 16.3% with a loss of $266,600 between years 7 and 8.
This clearly demonstrated the weakness of Competition Bikes that it has not met its goal of sales.

The total general and administrative expenses increased 20.4% with $156,440 in years 6 and 7. It also increased 1.2% with $11,004 in years 7 and 8. Regarding the utilities cost, there is 11.1% increase in years 7 and 8 comparing the 3.8% increase in years 6 and 7.
It also has a continuous growth at other general and admin expenses at 31.1% and 7.6%.
This demonstrates the weakness in expenses control.

The company cut advertising expense to response to the declining sales in year 7 and 8.
It is a weakness that company is unable to respond properly to the market changes.

In addition, there is 16.3% decrease of research and development in years 7 and 8 comparing the 37.5% increase in years 6 and 7.
Lack of research and development fund is a weakness and it needs to be addressed and resolved.

Thereafter, the operating income shows a 61.9% decrease with $218,392 between years 7 and 8 after the increase of 154.6% in years 6 and 7. The net income has an increase of 313.4 percent with $148,815 between years 6 and 7, but it has a decrease of 81.6 percent with $160,194.
This shows the performance weakness the company experienced in

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