Competition Bikes, Inc. Is a Company That Essay

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Competition Bikes, Inc. is a company that manufactures and sells high-end 2-wheel bicycles for sporting enthusiasts, racers, and professional bikers. This is a highly competitive industry and is likely price elastic because it is more of a luxury good -- not a necessity with a limited but global market. Key data for our analysis is based on the Income Statements and Balance Sheets for Years 6, 7, and 8. Our data may be viewed thus:

The clear issue for the company is that the growth experienced in Year 7 did not match sales in Year 8. Further data analysis shows that the company is relatively healthy, but does show some weaknesses when compared with industry standards:

CBikes

(Ave 7/8)

Industry

Analysis

Current Ratio

CBI has assets that exceed its liabilities by almost 6 times, higher than industry average.

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Collection Period

Lower than industry by almost 14 days, or close to three business weeks. This impacts cash flow.

Debt Ratio

Higher debt ratio, approaching 50%

Net Profit

2%

5.14%

Recent year had tremendous negative impact.

Vertical Analysis -- CBI has experienced a large decrease in net sales between years 7 and 8 as opposed to years 6 and 7. While sales have increase, COG as a percentage of sales have remained fairly constant at about 74%, indicating that material and labor costs are under control. Lower sales did result in advertising cuts. Using Income statements, we see that while net sales are down, gross profits are fairly level as a percentage of sales (about 27%) and sales expenses are reasonably steady for sales. General and administrative expenses have increased 3%, indicating that cost-cutting and/or procedural changes.....

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