Analysis of Competition Bikes Inc Term Paper Example | Topics and Well Written Essays - 1500 words

synopsis of Competition Bikes Inc - Term Paper ExampleIncome Statement is one of the fundamental fiscal statement that provides results of revenues, earnings, and EPS (Earning Per Sh are). The income statement provides a consolidated view of the revenue a comp whatsoever earned, the expenses it incurred and its effect on the bottom line, i.e. the hit during a certain flow rate of time. It is a mirror to the investors reflecting on comp whatever surgical procedure and its potential to perform. Essentially a company should be earning more than it is spending and thus signal profit earning opportunity to the investors. The horizontal analysis of the Income Statement of Competition Bikes Inc. would compare the performance of the company during the category 2006-2008. The pursuance is a snapshot of the Income Statement of company during 2006-2008 along with its horizontal analysis. We have compared the Income Statement of 2007 keeping 2006 as the base year and then analyzed the perf ormance of 2008 keeping 2007 as the year of reference. Horizontal Analysis of Income Statement 2006-2007 As we have mentioned earlier, there are two major sections of an Income Statement Revenue, Expenses, and Profit. Revenue damaging the expenses is the profit and we would look at the companys change in revenue and overall expenses during the period of 2006-2008. As it is evident from the horizontal analysis of 2007 with 2006 as the base year, revenues have sum up by 37.5% during the year 2006-2007 due to the increase in electronic network gross revenue by 33.3%, which shows that the company is strong in its bailiwick of operation. The Cost of Goods Sold also increased by 31.8%, which is very close to the percentage change of Sales during the year, thus indicating that it is not a negative sign. It is a concern for the company even if the profits are high when the increase in Cost of Goods Sold is not relative to the increase in Sales. A definite weakness for any company is its increasing expenses, specifically administrative expenses. The Selling expenses also increased during the year by 33% including the expense on advertising that increased by 37% and administrative expenses increased by 20.4%. A major chunk of the administrative expense is the expenditure on investigate and Developed which increased by 37.5%. The company believes in bringing a superior product to the foodstuff that has quality as well as first movers advantage with it, and it provides the company a strong marketing potential. Thus, the overall increase in the expenses was by 24%, which is not a positive sign for any company, specifically increment in administrative expenses exhibit operational inefficiencies as the company cannot justify the expenses with any particular expansion project. However, a more clear idea of selling and administrative expenses as compared to the gross revenue would be evident in the vertical analysis of the company. The operating income of the company, w hich is the revenue minus expenses increased by 154.6% and the overall profit before income tax and the Net Earnings increased by more than ccc% showing abnormal but phenomenal growth. A horizontal analysis of year 2007 keeping 2006 as the base year reveals positive growth for the company in terms of Sales and the overall Net Earnings that shows that Competition Bikes Inc. is moving in the right direction and growing. The major strengths of the company lies in the increase in S