Financial Statement For Competition Bikes: Western Governors University

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Pages: 27

Financial Statement Analysis
Competition Bikes

Western Governors University
Financial Analysis

A1. This financial analysis is for Competition Bikes that was taken from balance sheets and income statements from years 6, 7 & 8.
A1a. Horizontal Analysis
Net Sales – totaled $4,485,000.00 for year 6, and grew +33.3% or $1,495,000.00 between years 6 to 7.
Cost of Goods Sold – totaled $3,294,000.00 for year 6, and from years 6 to 7 grew +32.8% or $1,048,000.00.
Sales Commissions – totaled $134,550.00 for year 6, and from years 6 to 7 grew +33% or $44,850.00.
Gross Profit – totaled $1,191,000.00 for year 6, and from years 6 to 7
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Work in Process – totaled $130,000.00 in years 7 to 8 and displayed strength with $0.00 or 0% gain. The company did not need work in process inventory as orders were knowingly fewer in years 7 to 8.
Accounts and Notes Payable – totaled $63,341.00 in year 6, accounts and notes payable were solid raising 33.3% or $65,300.00 to $195,900.00 in years 7 to 8. This is a sign of strength as the company (in the prior year) had lower than expected sales. Disbursing more on accounts would have cost them their net income. Net income is revenues minus expenses, and if the expenditure is associated with an accounts payable, the expenditure is to be documented at the time the accounts payable is documented; not at the time of the payment. Doing this only affects 2 balance sheet accounts, no income statement account or other expense account is involved. Expenses are costs the company uses to earn revenue; they are also costs that expire during an accounting period, therefore they can occur before or after cash expenses are completed.
Accrued Salaries and Related Expenses – showed strength from years 6 to 8 due to the following:
Liabilities – totaled $16,000.00 in year 6 and fell -20% to $3,200.00, while increasing only +1.6% or $200.00 in year 7. These are strengths because liabilities are just that, they can rob a company of its profits; not paying out in accumulated salaries or related