Operational Strengths And Weaknesses

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1. Operational Strengths and Weaknesses
a. Horizontal Analysis
This type of analysis compares the percent and amount of changes from year to year. The analysis is performed on both the income statement and balance sheet to detect trends and identify any issues. This can be a very useful analysis especially when more than two years of data is available. With this analysis and various others a good understanding of how the company is operating can be seen.
Revenue Section
The income statement shows both strengths and weaknesses. There is a jump in net sales from year 6 to year 7 by 33%; this is a substantial increase for the company and strength. In year eight compared to year seven, the company has seen a decrease in net sales by 15%. Net sales show to be rather unstable and a possible source of weakness as well. The reduction in revenue is ultimately due to the current economic situations; which could be attributed to funding cuts by sponsors for some of the riders. This kind of up and down in net sales may be common for the company over the years to come. The company should also consider having a product to balance this out. Since their main source of sales is a specialty item it would benefit the company to have additional products that are more main stream to even out sales in the future. However, unit sales will most likely stay below year sevens high of 4,342,000, it is expected that unit sales will increase over the next three years to make up for its decline in year eight.
Cost of good sold has moved with the net sales, which is a positive note. This means the company is not spending more on products than sales allow, and purchasing is projecting accurately. However, there may be opportunity for the company to reduce the ...

... middle of paper ...

...to reduce interest can help increase this ratio, as well as increasing sales.

Overall all in the ratio analysis the company has several areas of strengths and several areas of weakness. It would benefit the company to reduce their expenses and increase sales to improve these numbers over time. The company is also struggling to keep up with competitors in several areas, and much of that could be combated with increased sales and better expense control.

2. Working Capital
Currently Competition Bike Inc. working capital is positive. The company has more assets than they do liabilities. The company has seen a decrease in their assets in the last year but the company’s liabilities have also decreased. The company’s working capital ratio has remained around 2.1 for the last three years. This is very positive for the company, a ratio between 1.2 to 2.0 is recommended.

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