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 accounts receivable increased from 6.5% to 16.6% and liabilities decreased to 46.7%.Year 8 current assets continues to increase to 37.2 cents out of every asset dollar of the company with total liabilities continuing also to decreasing to 45.9%.

Vertical analysis of the income statement provides the same type of information. Each component of Competition Bikes, Inc's income statement