Vertical Analysis Of Competition Bikes

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1. Vertical analysis Competition Bikes witnessed an increase in gross profit margin in year 7 at 27.4 having risen from 26.6% in the year 6. This is an indicator of the increase in Gross Profit in relation to sales. Year 8 however witnessed a marginal decline in Gross Profit margin which was reported at 27.0%. The 0.4% decline in Gross Profit margin between year 8 and 7 signifies that there was a proportional increase the amount of sales revenue that was taken up by the cost of sales. As a result, it is in order to state that there was a proportional decline of the gross profit by 0.4% of the total sales revenue and an increase in cost of sales by 0.4%. The total selling expenses in relation to sales remained constant over the three years.…show more content…
This clearly indicates that the earnings power of Competition Bikes declined in year 8. TWS had a slightly better earnings per share in year 8. There was also a notable a notable decline in the return on total assets. This indicates that the return of profit from investment for every unit of total assets declined. TWR had a better ratio of 4.8% signifying a signifying a higher return of profit from investment for every unit of total assets invested. The return of profitability for every unit of equity contributed by shareholders declined in year 8 as indicated by the return on common equity. TWS shareholders had far much better profitability for every unit of equity contributed by shareholders. This profitability ratio indicates that a unit of equity in TWR contributes 0.081 as profit attributable to shareholders compared to 0.014 in Competition Bikes In year 8, Competition Bikes witnessed a decline in price/earnings ratio. However, TWR had a higher price/earnings ratio. This is good for Competition Bikes, shareholders since it takes a shorter*** time to recover the market value of equity compared to TWR shareholders. In year 8, Competition Bikes witnessed an adverse decline in time interest earned. The high time interest earned of 4.24 for TWR indicates that the operating profit can pay interest charges 4.24 times compared to 1.77 in Competition
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