...Competition Bikes, Inc. Summary Report A1a. What is horizontal analysis? The comparison of two or more year’s financial data is known as horizontal analysis, or trend analysis. Horizontal analysis displays changes between years in both dollar and percentage. Showing change in dollar form helps the company pay close attention to key factors which have impacted the growth and profitability of the business. Showing changes between years in percentage form helps the company gain valuable insight. Horizontal analysis can be used for comparing and assessing the company’s growth during a particular time. In order to assess a company’s performance relative to its competitors, horizontal analysis is performed on multiple companies in the same industry. Horizontal analysis can be performed on a monthly, quarterly or annual basis. Horizontal analysis provides valuable information for the company; comparing the results of business activities over time to determine whether its financial situation is improving is an important part of the business operations. While horizontal analysis is a very important aspect to determine the company's financial performance, it also encounters some difficulties. According to the website Accounting Tools "A common problem with horizontal analysis is that the aggregation of information in the financial statements may have changed over time, due to ongoing changes in the chart of accounts[->0], so that revenues, expenses, assets, or liabilities may shift between...
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...excel document title, “JET2 Task 1-4 Workbook” and tabs ‘Task 4 Cost-Volume-Profit’, and “Task 4 Activity Based Costing” is where the information is derived from and recommendations will be made based off of the information in these tabs. The excel document title, “JET2 Task 1-4 Workbook” and tab ‘Task 4 Cost-Volume-Profit’ highlights two unit costs methods: traditional and activity based. Each unit cost method will be analyzed and a recommendation will be made regarding which costing method should be used by Competition Bikes. Traditional method to figure out costs- this method computes the overhead cost of titanium bikes at $239,020 and the overhead costs of carbonlite bikes at $232,380 for a total overhead cost of $471,400 ($239,020 + $232,380= $471,400). Again this information was derived from the excel document titled, “JET2 Task 1-4 Workbook” and by clicking on tab ‘Task 4 Cost-Volume-Profit’ and by viewing the second half of the page, looking at the summary of traditional and carbonlite overhead costs. Once the overhead costs are known the direct costs for each bike will be added to that number. So for titanium bikes the direct cost is $402,300 plus the overhead cost $239,020= $ 641,320 for titanium bikes. For carbonlite bikes the direct cost is $447,000 + $232,380= $679,380. The $641,320 for the titanium bikes is considered the total cost and the $679,380 is considered the total cost for the carbonlite bikes. Take the total cost for each bike and divide it by the number...
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...Running head: JET2 TASK 2 1 JET2 Task 2 Budgeting Bonnie Wilson Western Governors University JET2 TASK 2 A.1. Operational Strengths and Weaknesses A.1. Budget Concerns 2 Revenue from sales is budgeted too high. In year 8 Competition Bikes experienced a 15% decline in sales revenue, and yet for year 9, they have budgeted for a 3.2% increase. This is likely to be an overly optimistic projection and relies heavily on economic factors outside of the company’s control. Inaccuracy in this projection will have a negative impact on the rest of the budget. Advertising is budgeted too low. The year 9 budgeted amount of $28,412 represents a 3.5% increase over year 8, but it is still almost 20% shy of the amount spent on advertising in year 7 when sales were at an all time high. If the company is to have any hope of realizing its revenue projection, then the amount budgeted for advertising is too low. Executive compensation is budgeted too high. In year 7 executive compensation increased by $50,000 dollars. This made sense then because sales had increased by 33%. However, holding that number steady in year 8 when there was a 15% decrease, and again in year 9 when even a 3.2% increase is optimistic, is not a financially sound budgeting decision. Research and development is budgeted too low. The budgeted amount for year 9 is $85,237. While this represents the same 1.6% of sales revenue that Competition Bikes consistently allots, research and development is an investment in the...
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...main ways to analysis the financial statements of a business. This analysis provides a year to year look at the financial performance of the business being evaluated. The spreadsheet that is attached provides a horizontal analysis of years 6, 7,and 8 for the balance sheet and income statement for Competitive Bikes and Two Wheel Racing.The horizontal analysis can take into account either the dollar amount of the changes over theyears or the percentage of change for the years. This analysis will consider both items, and willalso be comparing years 6 and 7 and 7 and 8. Year 7 The analysis of years 6 and 7 shows a positive result for Competitive Bikes. RevenueThere was a positive increase in revenue for years 6 and 7. Net sales increased by $1,495,000 between years 6 and 7. This was a 33.3% increase for Competition Bikes. The cost of goodssold increased $1,048,000. This was a 31.8% increase. The fact that net sales increased by33.3%, and cost of goods sold increased by only 31.8% was a significant factor in these twoyears. This was a positive result, because net sales increased more than what the cost of goodssold increased. Competition Bikes found a way to sell more bikes at a lower cost for thecompany. This is why the company had an increase of 37.5% in gross profit.Selling ExpensesTotal selling expenses increased by 33% between years 6 and 7. This was expected, becausemost of the selling expenses are considered variable expenses. Variable expenses are expensesthat increase...
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...[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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...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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...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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...STORY Global Bike Inc. Background and overview of GBI strategy and operations. Product MOTIVATION PREREQUISITES SAP ERP G.B.I. Release 6.04 A general understanding of GBI (the enterprise) prior to embarking on hands-on exercises and case studies in the SAP ERP client is critical for success. None Level Undergraduate Beginner Focus Company Background NOTES None This narrative provides a historical background for how GBI began and an overview of its operations and strategy. This information will be used extensively throughout the curriculum material. Authors Simha Magal Stefan Weidner Version 2.11 © SAP AG CASE STUDY Company History Task Get to know the company’s history. Time 15 min Short Description Read the below narrative to learn about the company’s history. Global Bike Inc. has a pragmatic design philosophy that comes from its deep roots in both the off-road trail racing and long-distance road racing sports. Nearly 20 years ago, its founders designed their first bikes out of necessity—they had races to win and the bikes that were available at the time did not perform to their extremely high standards. So, they took matters into their own hands and built legendary bikes that would outlast and outperform the competition. From these humble origins, Global Bike Incorporated was born and continues to deliver innovative highperformance bicycles to the world’s most demanding riders. Notes ...
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...| Competition Bikes: Task 1 | | Jamila Mitchell | | Competition Bikes: Task 1 | | Jamila Mitchell | Western Governors University JET2 Financial Analysis Western Governors University JET2 Financial Analysis Competition Bikes: Task 1 Jamila Mitchell Operational Strengths and Weaknesses Horizontal Analysis To evaluate changes in financial statements, a horizontal analysis is necessary so the company can determine whether there is positive or negative growth over time. The changes in percentages is calculated and decisions are made according to the increases or declines. Competition Bikes: Year 7 Overall, year seven was a successful year for the company based on the horizontal analysis of the following financial aspects. Revenue Net sales went from $4,485,000 in year six to $5,980,000 in year seven, an increase of $1,495,000 or a 33.3% increase. The cost of goods sold in year six was $3,294,000, which increased to $4,342,000. This increase of $1,048,000, or 31.8%, was expected considering the increase in net sales. The cost of goods sold remained less than net sales, so this is a strength for the company. While both net sales and cost of goods sold increased, there was still a balance between the two. This shows that the company sold more products at a lower cost, which also attributed to the 37.5% increase in growth profits. Total Selling Expenses Total selling expenses increased from $299,220 in year six to $397,960 in year seven. This was...
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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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...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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...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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...JET2 Task 1 Horizontal Analysis Results Horizontal Analysis is defined as “a procedure in fundamental analysis in which an analyst compares ratios or line items in a company’s financial statements over a certain period of time. The analyst will use his or her discretion when choosing a particular timeline; however, the decision is often based on the investing time horizon under consideration.” (investopedia.com). This data is calculated in both dollars and percentages using data from the balance sheet and income statement. It is an extremely useful tool to evaluate trend situations. The Horizontal Analysis is used to determine Competition Bikes actual financial operating performance from years 6 through 8, with year 6 as the base year. When I looked at the analysis between years 6 and 7, I looked at the financial changes to see what the actual performance was by percentage. The net sales for years 6 and 7 showed a change of $1,495,000 which is a positive increase of 33%. This shows that sales have increased and leads the company to believe that the operating performance was also good and tha customers/dealers really like the product. There was a change of $1,048,000, an increase of 31%, for cost of goods sold. This shows that there is financial strength for the company and also shows that customers/dealers like the products. When looking at cost of goods sold, they should remain lower that the sales increase so that the company can control the cost...
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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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