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In: Business and Management

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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 the years or the percentage of change for the years. This analysis will consider both items, and will also 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. Revenue There 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 goods sold increased $1,048,000. This was a 31.8% increase. The fact that net sales increased by 33.3%, and cost of goods sold increased by only 31.8% was a significant factor in these two years. This was a positive result, because net sales increased more than what the cost of goods sold increased. Competition Bikes found a way to sell more bikes at a lower cost for the company. This is why the company had an increase of 37.5% in gross profit. Selling Expenses Total selling expenses increased by 33% between years 6 and 7. This was expected, because most of the selling expenses are considered variable expenses. Variable expenses are expenses that increase as production and sales increase. Sales commissions, distribution network support, and transportation out are all considered variable expenses. Knowing that net sales increased by 33.3%, and these expenses increased by 33% shows they are variable expenses. This increase was totally expected. Advertising expenses increased by…...

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