financial analysis task 1 wgu
Horizontal analysis allows side by side comparisons on a year to year basis to determine the performance from one year to the next. The company decides on standards to compare the results of the analysis. Standards are researched by checking competitors, internet research of general industry guidelines or standards created from past experience in the company.
The Company states in the summary that they attribute the net sales decrease in sales to the economy. The primary buyers of the bikes are professional bikers and with the sponsors of these professionals backing off the sales for this company took a direct hit. Competition Bikes Inc, also decreased advertising between years 7 and 8. This looks as …show more content…
Ratio analysis is a quantitative analysis of a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years. They may also be compared to other companies in the industry and may even be compared to the economy.
Earnings Per Share Ratio, which is on the income statement, shows viability and profitability. The EPS ratio is the earning potential of the company and is used to compare the company to its competitors. Fast growing companies will have a higher ratio compared to slower growing companies. The EPS for Competition Bikes is 0.03 for year 8 and 0.02 for year 7, with Two Wheel Racing at a 0.08 EPS Ratio. Current Ratio is the ratio of current assets to current liabilities. In year 7 the Current ratio is 5.79 and drops slightly to 5.25 in year 8. Competition Bikes is able to meet its debt obligations 5.25 times. The company has been good at maintaining a high ratio even with the decrease in sales in year 8. Looking Two Wheel Racing’s Current Debt Ratio at 4.2, shows Competition Bikes has been better at maintain a high ratio than the compotator. Acid Test Ratio tells whether the company can pay all its liabilities if they were due immediately. This ratio actually takes the inventory the company has into consideration. Ideally the industry standard is a ratio of 1:1, showing a company is solvent. Competition Bikes is at 4.14 in its most current year 8.