...Competition Bikes Task 1 Kevin Moore JET2 July 1, 2013 Competition Bikes Task 1 The financial statements have been released for the past fiscal year. The economic down turn has had an effect on the company; the company is performing well considering the state of the economy. The state of the economy is no excuse for the dip in the company; we must find ways to improve the company’s performance. Reviewing the financial statements will allow us to determine how to improve the company’s financial performance for the future. A1a. The horizontal analysis based on the income statement has indicated the net sales from years 6 and 7 were 33% , net sales from years 7 and 8 were -15%. That is huge differences in nets sales; this decrease is net sales in a weakness. The cause of the decrease can be a result of many different things, such as the company’s product is not being well received by the consumers. There is a similar change with the cost of goods sold, years 6 and 7 was 31.8% and years 7 and 8 was -14.5%. Change is cost of good sold is also a weakness, when the cost of good sold decreases but revenue increases that is a strength in this case the cost of good sold and revenue has decreased. Sales commission has also decreased, sales commission was 33.3% for years 6and 7, then decrease to -15% for years 7 and 8, the weakness can have a long lasting effect on the company. If the salespeople are not selling and making commission the salespeople may leave to work for...
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...A1a Horizontal analysis is the comparison of a company’s performance from year to year. (Horngren, Harrison, & Oliver, 2008) In reviewing CB, Inc.’s (CB) income statements and balance sheets for years 6, 7 and 8 we find fluctuations in sales, cost of goods sold and several other line items. CBs’ net sales experienced an increase of 33.3% from year 6 to year 7 with an increase in net earnings of 313.4%. In comparing year 7 to year 8 we find that CB did not have quite as good of a year; during year 8 the company experienced a 15% reduction in Net Sales with an 81.6% reduction in Net Earnings. We need to take a closer look at the Income Statement and Balance Sheet to see where CB could have performed better, therefore increasing the net earnings, especially in year 8. From year 6 to year 7 Cost of goods sold experienced an increase of 31.8% which is an acceptable increase since it was a smaller % increase than that of the increase in net sales. The cost of goods sold will increase as additional products are produced and sold. It is important to ensure that the cost of goods sold does not increase at a higher percentage rate than that of the Net Sales. From year 7 to year 8 the Cost of Goods Sold experienced a decrease of 14.5% which is a positive. By having a decrease in Cost of Goods sold during a year that you experience a decrease in Net Sales it shows that you are trying to be more efficient and work in a leaner environment. We will now begin looking at the...
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...Competition Bikes Inc Written by Administrator Tuesday, 03 July 2012 08:45 - Financial analysis: Company name: Competition Bikes Inc. Activity: Financial Analysis The financial analysis of a business organization involves the complete assessment of the liquidity, profitability, competitiveness and stability of the business. The process is done through using the financial statements of the business. The financial reports are generally presented to top management for purposes of decision making and setting up goals. Analyzing Competition Bikes Inc.’s financial status requires evaluating its internal operations reflecting the horizontal, vertical, ratio, and trend analysis, as well as its working capital. These reviews provide profit margins allowing for projecting any necessary budget restraints in overhead costs and sales potential. Yearly production performance comparisons, based on overhead versus profit, enable a budget projection for ordering production materials on a month-to-month basis. (Shim, J. and Siegel, J. 2009). Horizontal Analysis The horizontal analysis is the study of percentage changes of comparative statements in the case of Competition Bikes Inc.’s years six and seven, and seven and eight. Using the horizontal analysis chart, Competition Bikes Inc., shows the accounts payable, between years six and seven increased as it did between years seven and eight. 1 / 18 Competition Bikes Inc Written by Administrator Tuesday, 03 July 2012...
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...JET2 TASK 2 1 JET 2 TASK 2: Financial Analysis Theo Adams Western Governors University MBA Program JET2 TASK 2 2 (A1) Budget Concerns Investopedia defines Budget as an "estimation of the expenses and revenues over a specific future period of time. Budgets can be made for a group of people, family, person, country, business, government, organization or anything else that makes or spend money. The budget is a micro economic concept that shows the trade-offs made when one good is exchange for another." When looking at the year 9 budget for CB first thing that jumped out at me was the sales goal of 3510 is a 5247450. This is my first immediate concern considering that the storyline has clearly stated it is a down market due to the reductions in monies for sponsored professional riders from their sponsors. This is the main sources sales for the Carbonlite model from CB. The professional riders not having the same resources they had in year 7 when sales went to 4000 from the 3000 sold in year 6. which meant CB's revenue went from 4485000 in year 6 to 5980000 in year 7. This 33.3% jump was followed by 15% drop from 4000 units sold in year 7 to 3400 units sold in year 8. Again this drop was due to the cut in sponsorship money for the professional riders which ended up reflecting at the drop in revenue as well from year 7 to 8 of 5980000 to 4485000. These facts do not seem to warrant an increase in sales from 3400 units to 3510 units and an Increased Revenue to 5247450. Even...
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...A1. Good company citizenship goes beyond simply meeting the letter of the law. A socially responsible company should be aware of the effects its decision-making has on the community around it. This is illustrated in part “A” of the unanimously adopted policies of the Economic and Social Commission for Asia and the Pacific (ESCAP) Virtual Conference, the Regional Expert Group Meeting on Integrated Environmental Considerations into Economic Policy Making Processes, Bangkok, 20-24 July 1998. “The need and benefits of integrating environmental considerations into economic policy making processes: 1. Both economic development and protection of the environment are critical for sustainable development. The environment is not an isolated concern but cuts across all sectors. Also economic policies impact at multiple levels and across sectors. Therefore there is a strong need to merge/integrate environmental concerns into economic decision making processes in order to provide a more rational basis for decisions. 2. Such integration facilitates a holistic view on critical issues. It enables analysis of complementary and conflicting issues across a number of sectors, providing, in the process, for a better understanding by all parties. It can help prevent the cross-sectoral impacts of policies and programmes which are detrimental to the environment. 3. Integration enlarges the choices for policy makers by bringing into the matrix of decision making a wider mix of likely scenarios...
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...Discuss budgetary items that raise concern in the budget planning A master budget is the central planning tool for a company; it should include the following areas: * Direct Labor Budget * Direct/Raw Materials Budget * Finished Goods Budget * Manufacturing Overhead Budget * Production Budget * Sales Budget * Selling and Administrative Expense Budget Competition Bikes’ budget is subdivided into smaller budgets. The objective of the master budget is to provide a forecast based on sales projections for the next budget period (quarter, semester or a year). The master budget should meet the company goals. After analyzing the master budget for Competition Bikes we found a few areas of concern: The first one was a disregard of previous years’ trends. When year eight was analyzed we discovered changes in the economy which negatively impacted the company because of a decrease in sponsorships affecting the company’s sales. Competition Bikes should have taken a more conservative approach and set the budget at the same level of sales of year eight or have a more conservative increase on sales projections at no more than 1.5%, to reduce the risk of creating over sales and as a consequence to trigger a ripple effect of over-budgeting the operational and production budgets. Another area of concern is that utilities expenses were double recorded, once under “utilities” and another under “utilities and services”. In the same area of utilities we identified...
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...Running head: JET2 TASK 2 1 JET2 Task 2 Budgeting Bonnie Wilson Western Governors University JET2 TASK 2 A.1. Operational Strengths and Weaknesses A.1. Budget Concerns 2 Revenue from sales is budgeted too high. In year 8 Competition Bikes experienced a 15% decline in sales revenue, and yet for year 9, they have budgeted for a 3.2% increase. This is likely to be an overly optimistic projection and relies heavily on economic factors outside of the company’s control. Inaccuracy in this projection will have a negative impact on the rest of the budget. Advertising is budgeted too low. The year 9 budgeted amount of $28,412 represents a 3.5% increase over year 8, but it is still almost 20% shy of the amount spent on advertising in year 7 when sales were at an all time high. If the company is to have any hope of realizing its revenue projection, then the amount budgeted for advertising is too low. Executive compensation is budgeted too high. In year 7 executive compensation increased by $50,000 dollars. This made sense then because sales had increased by 33%. However, holding that number steady in year 8 when there was a 15% decrease, and again in year 9 when even a 3.2% increase is optimistic, is not a financially sound budgeting decision. Research and development is budgeted too low. The budgeted amount for year 9 is $85,237. While this represents the same 1.6% of sales revenue that Competition Bikes consistently allots, research and development is an investment in the...
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...Costing Method: The excel document title, “JET2 Task 1-4 Workbook” and tabs ‘Task 4 Cost-Volume-Profit’, and “Task 4 Activity Based Costing” is where the information is derived from and recommendations will be made based off of the information in these tabs. The excel document title, “JET2 Task 1-4 Workbook” and tab ‘Task 4 Cost-Volume-Profit’ highlights two unit costs methods: traditional and activity based. Each unit cost method will be analyzed and a recommendation will be made regarding which costing method should be used by Competition Bikes. Traditional method to figure out costs- this method computes the overhead cost of titanium bikes at $239,020 and the overhead costs of carbonlite bikes at $232,380 for a total overhead cost of $471,400 ($239,020 + $232,380= $471,400). Again this information was derived from the excel document titled, “JET2 Task 1-4 Workbook” and by clicking on tab ‘Task 4 Cost-Volume-Profit’ and by viewing the second half of the page, looking at the summary of traditional and carbonlite overhead costs. Once the overhead costs are known the direct costs for each bike will be added to that number. So for titanium bikes the direct cost is $402,300 plus the overhead cost $239,020= $ 641,320 for titanium bikes. For carbonlite bikes the direct cost is $447,000 + $232,380= $679,380. The $641,320 for the titanium bikes is considered the total cost and the $679,380 is considered the total cost for the carbonlite bikes. Take the total cost for each bike...
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...Horizontal Analysis Horizontal analysis is one of the two main ways to analysis the financial statements of a business. This analysis provides a year to year look at the financial performance of the business being evaluated. The spreadsheet that is attached provides a horizontal analysis of years 6, 7,and 8 for the balance sheet and income statement for Competitive Bikes and Two Wheel Racing.The horizontal analysis can take into account either the dollar amount of the changes over theyears or the percentage of change for the years. This analysis will consider both items, and willalso be comparing years 6 and 7 and 7 and 8. Year 7 The analysis of years 6 and 7 shows a positive result for Competitive Bikes. RevenueThere was a positive increase in revenue for years 6 and 7. Net sales increased by $1,495,000 between years 6 and 7. This was a 33.3% increase for Competition Bikes. The cost of goodssold increased $1,048,000. This was a 31.8% increase. The fact that net sales increased by33.3%, and cost of goods sold increased by only 31.8% was a significant factor in these twoyears. This was a positive result, because net sales increased more than what the cost of goodssold increased. Competition Bikes found a way to sell more bikes at a lower cost for thecompany. This is why the company had an increase of 37.5% in gross profit.Selling ExpensesTotal selling expenses increased by 33% between years 6 and 7. This was expected, becausemost of the selling expenses are considered variable...
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...JET2 - Financial Analysis - Task 4 JET2 – Task 4 A1. Costing Method Costing is used in business accounting strategies as a way of determining cost of manufacturing a product in relation to the revenue generated by that product. Costing systems determine the overhead of production and then allocate those overhead costs to a business’s product. There are two common methods for allocating these indirect costs to products, traditional costing and activity based costing. Both of these methods assess overhead costs and then attach these costs to products based on certain cost drivers, “a factor that causes cost to incur, such as machine hours, direct labor hours and direct material hours (Johnson 2014).” The first of these methods is Traditional Costing. This costing method drops all overhead costs into one bucket and then disperses them across three drivers, units produced, labor, and machine hours. Although this method works well for lines that are similar and consistent, one of its drawbacks is that this method does not account for customization requirements and overall complexity of the lines. So the company ends up allocating the same cost drivers across all production lines. The second method is Activity Based Costing. Activity based costing on the other hand, utilizes multiple cost pools as it relates to overhead costs based on resources used. Overall, this is a better cost system methodology for the company as it allows for the customization and specialty line...
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...RJET2 Task 2 Budgeting for any company can be a challenge especially when the economy does not change in the companies favor. For Competition Bikes, Inc. (CB) budgeting is an area that is both of great need and seriously lacking. The company is setting high goals to make up for the 15% loss of revenue from year 8 over the next three years. What the company needs to look at is whether or not their goals versus reality are a possibility and not make their budget too high or too low. Budgeting is a science and yet a gamble all at the same time. If the company has a strong budget that is flexible and realistic the company can expect to see great success in the future. A1: Concerns CB currently is setting a goal of selling 3510 bikes in year 9. During year 8 the company only sold 3400, year 7 was 4000, and year 6 was 3000. By establishing a goal for units sold the company is able to make a budget based on those numbers. The first concern with the budget is the goal of increasing sales by 110 bikes during year 9. While the company may be trying to push its sales to make up for the previous years deficits, they also need to look at what is still happening with the economy. Typically it takes more than a year for the economy to turn around and such a high goal, if not met, could ruin the budget for a second year in a row. CB needs to make a high goal to push its sales personnel to sell more, however with the economy still being down, the goal needs to be more realistic, as meeting...
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...JET2 Task 2 A1. Concerns There are many concerns with the budget planning for Competition Bike. From year 2006 to 2008, Competition Bike experienced a 13.3% increase in sales. In year 9, sales are projected to increase to 3510 units to give sales revenue of $5,247,450. This is a bold increase after 3400 units sold in 2008 and 4000 sold in 2007. I do not think the sales will be as robust with the economy rebounding. Sales projections should be 3425 with net sales at $5,120,375. Since the Competition Bike Company projected overly optimistic sales, there are several areas in the budget that will be affected. The areas affected are Sales Commission, Transportation Out, Advertising, Research and Development, Raw Materials, and Labor. * Sales Commission: With commissions budgeted for 3% of sales revenue, this amount is budgeted too high since the budgeted net sales is inflated * Advertising: This expense line will be incorrect due to it being based on 2% of the Gross Margin. The Gross Margin will be off due to inflated projections. * Raw Materials: Due to inflated sales projections, the raw materials cost should be lowered to reflect a realistic net sales projection. * Labor: Labor cost should be reduced due to fewer hours being used with my projection of fewer units being sold as compared to the 2009 projections. It takes 15 hours/unit, so with fewer than projected sales, this should be reduced. * Transportation Out: Since the projected sales...
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...JET2 Financial Analysis Task 1 Western Governors University Kim Laudig, RN, BSN, MSN 11/01/2014 JET2 Financial Analysis Task 1 A1a Horizontal Analysis Results The Horizontal Analysis Results are taken from Competition Bikes’ Income Statements and their Balance Sheets. A Horizontal Analysis looks at data from one year to the next, usually over a three year span. This company’s Horizontal Analysis is comparing year six to year seven and year seven to year eight. While evaluating the company’s operational strengths and weaknesses, and analyzing the results of the Income Statement for years six, seven, and eight, there were several areas of concern. Years seven and eight shows the most areas of concern for the company. However, while analyzing years six and seven, there were some positive results for the company. During years six and seven, there was an increase in revenue. Net sales increased by 33.3% increase. The cost of goods sold also increased. This was an increase of 31.8%. The fact of increase with both of these analysis showed positive results. The increase of net sales should always be more than the increase in cost of goods. If this does not happen, than the company is spending more on parts and supplies than they are making on goods sold. This also showed the company was able to sell more bikes at a lower cost than they had to spend on the supplies needed to make the bikes. This was proven by the company showing a 37.5% increase in gross profit...
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...Stacy Raudman 000202145 JET2 Task 2 A1 Discuss budgetary areas that raise concern in the budget planning In any business, a budget serves a specific purpose. It serves as a forecast of money coming in and money going out which then shows whether or not there is a profit. It also serves as a tool for making decisions. And, lastly, it is a means to monitor how a business is performing. Watching for profits and/or losses, will tell a company if their strategies are working or not and whether they should move in a different direction for improvement. Money, in any business, needs to be controlled and decisions need to be made on where is best for that money to be spent in the best interest of the company. Monitoring how a business is performing can tell management or investors if the company is living up to their expectations. If it isn't, the company can have the opportunity to move in a different direction for improvement. In reviewing the budget and proforma statement for Competition Bikes, there are a few areas of concern which are discussed below. In 2006, the company sold 3000 units and had a nice increase in sales in 2007 to 4000 units. In year 8 however, there was a decrease in sales down to 3400 units. The company is forecasting sales in 2009 to be 3510 units and continuing increasing the following two years as well. Due to the stated economic decline and cut back on sponsors that pay for bikes for professional riders, the company is anticipating...
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...Jet2 task 3 Competition Bikes, Inc.Financial AnalysisJET2 Task 3 Introduction Competition Bikes, Incorporated (CBI) has decided to weigh their options for expansion into Canada by either acquiring or merging with Canadian Bikes, Inc. This report will discuss the proposed expansion and make recommendations based on the company's capital structure. Capital structure can be described as how a business finances its assets. There are two main types of capital: Equity and debt. Capital structure is usually a mix of debt, preferred stock, and common stock that the company can use for expansion and to remain financially healthy. The key is to choose the right mix in order to maximize shareholder return. A1. Capital Structure Capital structure is generally defined as how a company finances its assets. It is measured as a percentage of debt and equity (common and preferred stock). Potential investors tend to look positively on a company that has more equity and less debt. The best capital structure approach for CBI to take is to implement the 50% Preferred and 50% Common Stock scenario. This alternative provides the best overall way to improve CBI's financial position with strong capital structure while maximizing shareholder return. A1a. A review of Canadian Bikes data over five years indicates consistently increased earnings before interest and taxes (EBIT), increased net profit, and increased shareholder returns (EPS). Offering the 50% preferred and 50% common stock...
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