Essay about Jdt2 Task1

8361 Words Apr 22nd, 2015 34 Pages
Financial Analysis JET Task1
Western Governors University

Prepare a summary report in which you do the following
1. Evaluate the company’s operational strengths and weakness based on the following:
A. Horizontal analysis of financial statements involves comparison of a financial ratio, a benchmark, or a line item over a number of accounting periods. This method of analysis is also known as trend analysis. Horizontal analysis allows the assessment of relative changes in different items over time. It also indicates the behavior of revenues, expenses, and other line items of financial statements over the course of time. Horizontal analysis of financial statements can be performed on any of the item in the income
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Since the company sold more in the same year, they probably spend more to make more goods that were sold. However in year 7 and 8, the cost of goods sold was decreased compared to the previous year to -14.5%. This decrease could be a sign that the company did not manufacture as much product as they did in year 6 and 7 and at the same token, it was already established that the net sale for year 7 and 8 was also less that years 6 and 7. In accounting, when cost of goods sold increases, net sales should also increase but the percentage of the cost of goods sold should be less that the net sale percent to be advantage to the company and can also be a sign of strength indicating that the management was able to control cost of manufacturing their product.
3. Gross Profit: Although there was a sign of an uptrend in year 6 and 7 of a 37.5% increase in the gross profit, the executive in that same year were rewarded with a bonus in pay of 29.4% representing a sign of strength to the company. That same level of strength was not sustained in years 7 and 8 because the net sale was down. And since sales were down it will also reflect on the profit that the company will make for that same year and because of sales were decreased and the profit margin was also decrease and all these could be some of the issues resulting to the company executives not getting any bonus from years 7 and 8.
4. Executive Compensation: from the data provided, the executive salary of competition

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