Chapter 2 Runing Case Assignment: Analyzing Financial Performance

Software skills: Spreadsheet charts and formulas

Business skills: Financial statement analysis

As part of your analysis of the company for management, you have been asked to analyze data on Dirt Bikes’s financial performance. Review Dirt Bikes’s selected financial data in the Introduction to Dirt Bikes, which can be found at the Laudon Web site. There you will find Dirt Bikes’s income statement and summary balance sheet data from 2005 to 2007, annual sales of Dirt Bikes models between 2003 and 2007, and total domestic versus international sales between 2003 and 2007. Use your spreadsheet software to create graphs of Dirt Bikes’s sales history from 2003 to 2007 and its domestic versus international sales from 2003 to 2007. Select the type of graph that is most appropriate for presenting the data you are analyzing. Use the instructions at the Laudon Web site and your spreadsheet software to calculate the gross and net margins in Dirt Bikes’s income statements from 2005 to 2007. You can also create graphs showing trends in selected pieces of Dirt Bikes’s income statement and balance sheet data if you wish. (You may want to rearrange the historical ordering of the data if you decide to do this.) Prepare an addition to your management report that answers these questions:

• What are Dirt Bikes’s best- and worst-performing products? What is the proportion of domestic to international sales? Have international sales grown relative to domestic sales?

• Are sales (revenues) growing steadily, and, if so, at what rate? What is the cost of goods sold compared to revenues? Is it increasing or decreasing? Are the firm’s gross and net margins increasing or decreasing? Are the firm’s operating expenses increasing or decreasing? Is the firm heavily in debt? Does it have