A.1.a Horizontal analysis
Horizontal analysis is essentially an analysis on the trend of the financials of the company. It shows changes in the amounts of the amounts over a period of time. In the financial statement provided, the horizontal analysis is between years six and seven, and years seven and eight; respectively. When analyzing the income statement provided with the task, several strengths and weaknesses are very apparent. They will be broken down individually and analyzed separately. Horizontal analysis is calculated by using the formula below ("Horizontal Analysis," n.d.)
Revenue: Net sales between years 6 and 7 demonstrate a 33.3% increase or an increase in approximately $1.5 million.
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Sales commissions won’t be discussed as they correlate to employee payments for sales and closely represent sales trends. Website creation and maintenance will not be discussed. No increase or decrease was seen and the number spent every year did not change. Distribution Network Support is essentially support associated with distribution of the goods. Likely a contracted number per unit sold like the Transportation Out@$30/unit contract, this closely correlates with the overall sales numbers. Positive growth between years 6 and 7 demonstrates the cost to deliver and distribute the product increased as well. While spending money to distribute product is a weakness, it’s primarily positive until renegotiations can occur to bring these costs down. Mostly, this is a strength for the company because product is moving. Years 7 and 8 demonstrate a decrease in -15% for distribution and transportation. These numbers are considered a strength when looking only at the numbers. Upon closer inspection, this demonstrates the weakness of sales and decrease in units sold; therefore this number is truly a weakness for the company and closely correlates with the decrease in net sales, cost of goods sold and gross profit. Total selling expense for years 6