Horizontal Analysis
Horizontal analysis is one of the two 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 as production and sales increase. Sales commissions, distribution network support,and transportation out are all considered variable expenses. Knowing that net sales increased by33.3%, and these expenses increased by 33% shows they are variable expenses. This increasewas totally expected. Advertising expenses increased by 37.5% which is