Competition Bikes, Inc is a large company and similar to many other companies in the recent years, have been affected, at times adversely, by the ever changing needs of the public and the recession. As expected the financial status has faced many changes during this time. It is imperative to analyze and identify the strengths and weaknesses in all aspects of this company. This includes their working capital, their risks, internal controls set in place and to make certain that they are compliance with the current regulations that will let the organization build their profit and commit to a solid game plan for their growth and development in the coming years.
Horizontal Analysis Results
A horizontal analysis compares several years in a linear means and then this data is compared with the totals calculated to give the percentage of change. This organization has multiple strengths and weakness in the financial statements according to the information given in the horizontal analysis. The net sales of a company are the sales after any deductions are made, such as refunds or discounts. One of the weaknesses of this organization is that sales have dropped within the last year and they had a net sales change that was -15.0% for years 7 and 8. One strength of this organization is that they have the potential for increasing their net sales in the future. The analysis shows that from years 6 to 7 there as actually a 33.3% increase in sales due to the increase of sales of products sold. The company does sell a highly wanted product and if the economy makes an upswing the net sales are projected to increase with it in the coming years. The organization’s gross profit has stayed relatively stable. The gross profit is the number obtained when you take the net sales and subtract the cost of products. Years 6 to 7 shows an increase of 37.5% gross profit and years 7 to 8 show a -16.3% gross profit. This company still made more money in year 8 than in year 6 even with the downturn of the numbers and economy. This shows a definite strength for this organization and shows that their product is an exceptional product and is coveted by the consumer and even if selling less, they are still selling well in the downturned economy.
When we analyze the organizations operating expenses, this area also shows strengths and weaknesses both in reference to their selling expenses. Years 7 to 8 show that the company lowered their selling expenses by 14.9%. This is one of the weaknesses the company has in their operating expenses. When an organization decreases their exposure to the public, they are taking on a very large risk of how the public will find out about the company and their product. Also, when the company reduces their distribution network support and the transportation of their product, how can they be most efficient for the consumer when they need to transport and ship their product world-wide. When the economy has taken a downturn and organizations have had decreased sales, the organization should increase their selling expenses and decrease expenses elsewhere so that they can put the effort into broadening their exposure so that can try to attempt increase their sales.
During years 6 to 7 the organization had 33% increase in selling expenses. Part of this might be given to the commission sales increasing those years, however, the 16.3% decrease in years 7 and 8 show a weakness in the organization that needs to be addressed.
This organization has not had a strong presence when it comes to their marketing campaigns and this could be directly related in causing decreases in sales, especially in light of the fact that the advertising budget was cut for the 7 and 8th years. Another thing that the organization does is that they use a distribution network to assist in the sales of their products. When the organization decreased the budget by 15% in years 7 and 8 for this support network, fewer consumers had access to the product and