Financial Analysis of Competition Bikes Essay

Financial synopsis of emulation hertzsIntroduction            In pecuniary summary a complete assessment of a strain organization c overing competitiveness, expediencyability, liquid state and stability concerns. Financial depth psychology of a credit line is undertaken by reviewing the occupation financial statements. Summarized financial statement reports atomic number 18 much presented to executives and top managers for setting up business goals as hearty as make decisions. Analysis of the financial statements of competitor pedals expect military rank of the inhering ope limit center on plumb, horizontal, symmetry and trend analyses and the running(a) expectant. These evaluations communicate avail gross derive margins enabling hump of budgets and restraining hoggish tax revenue and costs potential. Annual simile of end product capital punishment crush to profit versus overhead helps in forecasting of bu dgets for production ingredients on a monthly al-Qaeda (Shim, J. and Siegel, J. 2009). ambition Bikes level Analysis            This is the interrogative sentence of percentage changes in comparative degree statements of a business. In this case, it is the evaluation of opposition Bikes comparative statements amongst the yr 6 and 7 as well as 7 and 8. The horizontal analysis chart helps in indicating the value of accounts payable differential in class 6 and 7 as well as form 7 and course 8. The unions exone footstep realise gross revenue soared up by 33.3% among stratum 6 and 7 at $1,495,000. However, crystallise sales differential mingled with course of instruction 7 and 8 was a negative implying that sales ebbd by 15% at $897,000. Therefore, it is essential that rivalry Bikes increases annual sales to reap highschooler profits. The value of gross profit registered was a negative token of $266,600 tantamount(pr edicate) weight to 16.3% come. Interestingly, the participation registered a 37.5% gross profits increase amidst course of instruction 6 and 7 at $447,000.            The quantify plosive speech sound between buy of crank materials, manufacturing and distribution of goods is referred to as the operating(a) roll. The net percentage point in order of battle of utility from stipends and sales is the exchange conversion cycle for the different ingredients consumed and produced by challenger Bikes. The beau monde witnessed a decrease in the operating cycle between grades 6 and 7 from 50.52 to 48.00 days. This is explained by the change magnitude product of sales relative to the inventories ripening rate. The immediate payment conversion period between stratum 6 and 8 was relatively negative. This is because Competition Bikes Inc has a high liquidity owe to the short receivables period supplemented by a lengthy payable defe rral period. It is popular mood of the efficient worry of the familys resources.            The aggregate of administrative and general expenses between form 6 and 7 change magnitude at $156,440 homogeneous to 20.4% increase. However, the increase between division 7 and 8 was heavyly lower at $11,004 equivalent to 1.2% increase. Still, Competition Bikes Inc operating income between division 6 and 7 increased at $191,820 equivalent to 154.6% increase. However, this parameter decreased at $318,392 equivalent to 61.9% decrease. Higher profits were registered between course of instruction 6 and 7 relative to year 7 and 8 which registered a dcrease in profits.            In addition, the ac friendships cash account differential between 6 and 7 was a decrease of $142,451 equivalent to 54.6%. However, this differential increased between year 7 and 8 at $326,475 equivalent to 275.4%. The net l iabilities difference between year 6 and 7 was $128,620 equal to 1.2% increase. correspond to horizontal analysis, the occur liabilities differential from year 6 to 8 was a decrease at $35,500 or 1.9% (Brigham, E. and Houston, J. 2007).            Still, Competition Bikes common equity differential between year 6 and 7 was a 2.9% increase equating to $119,914 increase. Horizontal analysis of the same parameter evidences a wane between year 7 and 8 equal to $2,400 or 0.1% decrease. Since year 7 and 8 registered a lesser loss comparative to the gain between eld 6 and 7, Competition Bikes Inc. stony-broke even in the former eld from the aggregate of year 6 and year 7.Competition Bikes Inc Vertical Analysis            In vertical analysis, an exploration of a friendships statement of financial part is considered to validate each element comparative to the total assets as a percentage. For th e income statement, vertical analysis involves exploration of the dissimilar variables subject to total sales. This analysis helps in evaluation of the financial performance of Competition Bikes Inc with time. The tabulation below indicates the Vertical Analysis of the Competition Bikes Incs Balance Sheet count elements twelvemonth 6Total assets ($4,199,303) Year 7Total assets ($4,319,217) Year 8Total assets ($4,316,817)Notes and accounts Payable 1.6% 4.5% 6.1%Accrued Salaries and opposite expenses 0.4% 0.3% 0.3%Accrued Expenses 0.5% 0.6% 0.6%Mortgage 42.9% 39.4% 37.1%Long line Liabilities 2.1% 2.0% 1.9%Stockholders Equity 52.5% 53.3% 54.1%            Competition Bikes Inc Vertical Analysis assesses the liabilities, equities and assets of the fraternity. Overall, the operating expenses fluctuated in itty-bitty figures indicate a strong internal look policy. Therefore, there was little depreciation on the follow subject to the operat ing sales versus costs. The proportion of liabilities decreased over the terzetto historic period indicating an improved ability in Competition Bikes Inc to settle debts. The proportion of common equity relative to debts increased over the period signifying a growth in the net capital of the partnership.Competition Bikes gallery Analysis            This is the evaluation of the financial performance of a business over time. Firstly, Competition Bikes Inc balance sheet figures increased enormously between years 6 and 8. This signifies growth and magnification trend in Competition Bikes. On average, the gild grew at 3.3% which is a sustainable growth rate. Over the tether years, the sales dropped significantly and especially between year 7 and 8. Nonetheless, the profit margin was relatively strong due to little fluctuations in overhead costs much(prenominal) as materials, productions costs and carrier fees. Therefore, it is potenti ally possible that the future sales in years 9, 10 and 11 high provided the accompany maintains the real growth and expansion rate.            Based on trend analysis, it is judge that the companys sales in future depart remain strong. This inspires the shareholder to invest more in the company over the next tether years. profit are anticipated to increase at 103.2%, 107.6% and 111.8% over the next three years respectively. In special, further prodding of the companys financial statements indicates a declining rate in sales growth rate. For instance, the company sales increase at 8.65% between year 6 and 7 as well as 9.85% between year 7 and year 8. Nonetheless, the significantly downhearted sales growth rate is associative to higher boost in net income which rose by 12.82% and 14.46% in year 7 and 8 respectively.Competition Bikes symmetry Analysis            It is the de destinationina tion of the past years financial performance relative to former(a) companies ratios, trends as well as those of the company/business under review. These ratios include liquidity, advantageousness and faculty ratios.            Liquidity ratios extracted from the statement of financial position determine the ability of the business to pay its debts at and as when they fall due. The fractions are significantly important in computation of the business ability to pit its short term and long term financial obligations and goals. Quick ratio is computed by dividing quick assets by current liabilities. The company registered a low quick ration of 3.11% and 3.21% for years 8 and 7 respectively. This is because as a motor bike retailer, the company must hold high levels of ancestry meaning that most of the works capital ends up tied. Considering that the company enjoys a picayune stock certificate turnover ratio, this is not a worrying level .            Efficiency ratios include the inventory turnover ratio and the average ingathering period. The former is obtained by dividing total sales by total inventory. This ratio indicates the efficiency and the rapidity with which the company manages to sell its bikes. In year 7 and 8, the companys inventory turnover fell from 46.7 to 45.9 indicating decrease strength in paying withd naked as a jaybird debts. The latter ratio is the anticipated period of cashing owed receivables from clients. Competition Bikes Inc current average collection period is 102.6 days. It is not an ideal season because it implies delayed conversion of receivables into cash for change debts and expenses.            Profitability ratios include return on assets and gross profit margin. The former ratio assesses the aptitude of Competition Bikes to raise revenue from its assets. The companys return on asset paramet er in year 7 and 8 was 4.52 and 4.25 respectively. The gross profit margin at the same period was 27.4% and 27% respectively. However, this was a 4.7% drop from the preceding 5.3%. The fall in profits translates to shortsighted trading operations and hence the need to appreciate the companys strategies.Competition Bikes operative Capital            This is the difference between the current assets and the current liabilities. It is important to a business because it determines the available resources for increasing production, hiring additional staff, merge and buying out other companies as well as investing in expansion projects. The company had a working capital of $2,123,000 and $1,768,000 in year 7 and 6 respectively. The increased values in working capital indicate an progress working capital over the three years.Internal deem Strengths and Weaknesses            These are prevailing in the accounts departments. The company has adequate resources to pay its operations now and into the future. This is because all activities are adequately covered financially. Besides, the company boasts a readily available clientele with a potential to attract additional clients. The company maintains a check and balance schema to break sales, purchase and cash management translates to a strong internal control system.            Corrective action in weaknesses lists changes to be made to enhance completion of targets and achieving of total significance in a business. The operations and management for implementation are penalize by the management to ensure liquidation of identified weaknesses. When the firms adopts a tracking system, proceeding of identified strategies top resolve the deficiencies is good executed. Corrective actions were installed to improve production and buy deficiencies. This is to help in constant interro gatory as well as cooperation among various departments in the business.Risks            Businesses face constant risks and scourges and therefore, it is important to identify, hatch and mitigate the risks. Competition Bikes is capable to numerous risks such as increased competition resonating to low profit margins. Therefore, the company must strategize on maintaining and attracting additional clients. Still, the internal controls are a threat to the company. Impromptu competition between purchasing unit and the explanation department may result to delay in payment of invoices. Proper communication lines must be set within the company to address broken communication. shape            Competition Bikes Inc abidance with Sarbanes-Oxley is indicative of the stringent monitoring controls that the company has installed for internal auditing purposes. This assures stakeholders of the efficient management of the company as well as in compliance with different regulatory cloth. Compliance entails provision of an admirable working framework such as motivation of employees, belongings of skilled labor and recycling of products. recommendation            Considering the past performance of the company, it is recommended that the firm must maintain a sound internal control system. This will report deficiencies such as weaknesses in financial reporting. It will help in securing a tuck in tight financial recording and documentation. finisher monitoring and evaluation of the excess raw materials and manufacturing surpluses will be maintained in reasonable amounts reducing overspending and potential theft.ReferencesBateman, T. S., & amp Snell, S. (2013). M Management. New York, NY. McGraw-Hill Companies.Internal Control Systems. (2011, July 4). Committee of Sponsoring Organizations of the Tread way heraldic bearing (COSO). Retrieved D ecember 12, 2013, from http//www.coso.org/documents/COSO_ERM_ExecutiveSummary.pdf.Kieso, D. E., & Weygandt, J. J. (2012). Intermediate accounting (9th ed.). New York Wiley.Shim, J. K., & Siegel, J. G. (2012). Schaums enlist of financial management (2nd ed.). New York McGraw-Hill. etymon document