Financial Analysis



Competition Bikes, Inc

Introduction

As companies are facing tough economic environment it is essential to prepare a budget in order to control finance. Operating a business frequently needs management to cautiously plan and review finance of the company. Majority of the companies employ certain techniques in order to identify, measure, analyze and report their financial information. These techniques consist of budgeting, financial statement, prediction and various tools in order manage financial information. Hence, budget perhaps is mainly crucial accounting tool for companies.

Budget summarizes as well as incorporates the entire organization budget. Budget assist in formulating the current company position and what company has been looking for in future. Beside this, budget highlights strategies that would be suitable and needed for achieving those future goals. The focus of this task would be on analyzing Competition Bikes Flexible Budget. Beside this, this task will also cover budgetary areas that raise concern in the budget planning, in-depth analysis of flexible budget and the variances and Recommend corrective actions for highlighted concern. Furthermore, this task will also cover Management by Exception concept with respect to variances.

Discussion

Budgeting has been a huge challenge for companies since economies of the countries are not in favor for companies. As far as Competition Bikes is concern, budgeting has been an important part as they are lacking in this area. Competition Bikes has suffered 15% reduction in sales in most recent year and they have set high goals in order to recover this 15% loss from coming three years. At this point, company need to gaze whether their goals has not been properly match up in reality and whether their budget is too low or high. Budgeting at the same time is a science as well as gamble. Company having strong flexible & realistic budget then company expects to experience vast success in future (Balakrishnan, Sivaramakrishnan , Sprinkle, 2007).

A1. Budgetary Areas concerns

Competition Bikes has set a goal to sell 3510 bikes in 9th year. In year 8, Competition Bikes has made 3,400 units of sales while in year 7 sales were 4,000 and two year age sales were 3,000. The goal established by Competition Bikes for selling stated units would create hindrance in budgeting.

The first concern is that sales units have been increase by 110 bikes in year 9. But what objective has been set by company is to recover the deficit experienced in previous year through pushing sales. At this point, they need to look what is happening in the economy, whether it is favorable to the company or not. In general, economy takes at least a year to turn around the situation and if stated objectives which high not met, this can ruin entire financial statements for the current year as well as budget for second year. Competition Bikes requires to set goals in order to push their sales personnel for selling more bikes (Belverd, Powers, Susan, 2011). Therefore, as the economy is not performing well the goals need to be mush realistic ...