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A1a: 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 prices have not seen an increase. We also see that advertising has been cut by 16.3%, this can be assumed is due to lower sales. When looking at the line titled general and admin expenses we see that Competition Bikes, Inc. has been able to contain their costs from the previous period, even though utilities have risen 11.1%, this most likely can be attributed to the higher cost

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