BIKE BROTHERS (FIRM 1)

Dylan Roth (201102176)Patrick Gormley (201103706)Maclean Patterson (201105266) Kunle Tosin Idris (201101463)

FIRM OVERVIEW

Sales: $16,033,526 Units Sold: 38,072 Costs: $9,448,743 Profits: $2,071,876 Shareholder Value: $8.76 Earnings per Share: $1.45 Mountain Bike #1 Price : $748 Mountain Bike #2 Price: $570 Mountain Bike #1 Quality: 0.84 Mountain Bike #2 Quality: 0.84 Mountain Bike Direct Competitors: RTP Bikes, Firm3, The

Capable Jaguars, Mikes Bikes and Pro Bikes

VERTICAL ANALYSIS

Gross Margin was Bike Brothers most consistent from year to year staying at a average change of 41.68%

Finishing 2018 with a 41.59% increase in gross margin.

Total Assets, Total Liabilities and Shareholders’ Equity had a large increase in 2015 going from 160% to 210.81% after 2015 total assets slowly declined ending 2018 at 127% increase.

HORIZONTAL ANALYSIS

We saw our gross margin increased throughout the 5 years, seeing the largest increase in 2016 after our 2015 introduction of our 2nd mountain bike.

In 2015 we experienced a decrease in total assets, total liabilities and shareholders’ equity of -14% after we saw them start to increase again, increasing in 2018 of 15.57%

RATIO ANALYSIS

According to the ratio solvency Bike Brothers current ratio is in good standing at 16.44% meaning that our company has a high liquidity, Bike Brothers best year for current ratio was 2016 with a ratio of 46.11%.

Debt to equity ratio was considerably low throughout the last 5 years averaging a ratio of.24%, our company has a low amount of debt, and is therefore exposed to less risk in terms of interest rate increases.

Earnings per share was below the industry average of 6.31% as we experienced difficulty early on generating profit in 2015.

Return on equity can help us explain why we were profitable in the latter years. The return on equity deteriorated from .18 in 2014 to .14 in 2018 a difference of .04.

SALES

In our Horizontal analysis we saw our sales grow the biggest after 2015 of 45.56%, our sales growth slowed down after 2015 to a sales growth of 4.20% during our last year.

The addition of the second mountain bike put a hold on our sales for the first year.

COST OF GOODS SOLD

We Found in our Vertical Analysis that COGS experienced a constant decrease from 2015 having a revenue cost of $.60 per unit to $.58 revenue cost per unit in 2018.

In our Horizontal analysis Bike Brothers COGS started 2015 with a increase of 45.56 then ended 2018 with a decrease to 3.49%

2015 being our largest year for COGS being as we inserted our second mountain bike.

PROFITS

In our Vertical analysis. We saw profitability decreased from 13.71% in 2014 to a mere 9.05% by 2018. Once again we ran into struggles in 2015 having -5.37% after the insertion of the second mountain bike.

In our Horizontal analysis we saw profits in 2015 start at a percentage rate of -151.16 and decrease significantly in 2016 to -250.43, after 2016 Bikes Brothers slowly regained a positive profit ending with an increase of 30.50%.

Bike Brothers recovered well after a bad 2015 year, having a negative profit of -685,586.

After 2015 we had a steady 3 years of positive profit, increasing each year ending in 2018 with a profit of 1,450,313.

MARKET ANALYSIS

Our Company sales (Adv1) level increased by 7.2% from 19,102 per bike to 20,474 in 2017 to 2018 and it increased more in 2016 to 2017 by 10.8% from 17,236 to 19,102. the sales (Xtreme_2015) level of our second product remain the same at 17600 from 2017 to 2018.

Our (Adv1) price is the second highest sales in the industry and we are 3,726 below the highest sales in the industry. And our (Xtreme_2015) is the fifth highest in the industry with 6,598 below the highest

CONTINUED…

We have the second highest Awareness in the industry with just 0.1 different from the highest firm in the industry with (Adv1) . While (Xtreme_2015) have a low awareness of 0.11 below the highest in the industry.

Adv1 promotion (awareness rating) of 0.29 is 0.06 above the industry average promotion rate of 0.23 and Xtreme_2015 awareness rate of 0.18 is 0.05 below the industry average  

CONTINUED…

Adv1 and Xtreme_2015 have the same distribution rate of 0.55 is 0.05 above the suggested distribution target

We increase our company distribution rate for (Adv1) by 2% by 0.54 to 0.55 in 2017 to 2018. And (Xtreme_2015) also increased by 2% by 0.54 to 0.55 in 2017 to 2018.

OPERATIONS ANALYSIS

The cost of goods of our firm increased by 3% from $9,049,484 to $9,364,940 in our previous year to our new current year.

The firm wastage decreased by -30% from 10% to 7% in previous year to this current year

Our firm cost of goods of $9,364,940 is $220,099 below the industry average cost of goods of $9,585,039

STRENGTHS

Consistently showed profit over 1 000 000 4 out of 5 years Profit of $1 031 293 in 2016, $1 111 333 in 2017 and a

30.5% increase to $1 450 313 in the 2018 period Highest Share of mountain bike market (26.4% of total

sales in 2018 Share growing around 1% per year

Both bikes hold High PR & Distribution ratings .11 PR rating highest in simulation .55 Distribution tied both for second

Sold all available inventory for Xtreme 2015 and effectively undercut competitors in market Price of $570 compared to market average $709

WEAKNESSES

Low Shareholder Value Just $8.76 in 2018, second lowest in the simulation

No presence in other product markets Poor sales projections and inventory led to excess

inventory for first product and excess demand for second 6238 estimated lost sales 2018

Low net assets compared to competitors $10,220,398 in 2018 compared to average $18,347,873

Profit after tax below average $1,450,313 in 2018 compared to average $5,559,543

Low cash balance $9 360 333 in 2018 compared to the market average of $16

007 890

OPPORTUNITIES

Increase production and support of our second product, Xtreme 2015 6238 in lost sales 2018 Can increase price and still undercut competitors

Increase Shareholder value by issuing dividends Reduce idle time by better allocating resources

13% idle time 2018 Decrease % of each sale we give to retailers

Currently giving 37%, the highest in the simulation world Attempt to enter new market taking advantage of price

skimming strategy Competitors already established, less risky than predatory

THREATS

Other firms have much higher working capital Average cash for top 3 firms 2018 is 27 395 147 More ability to take financial risk

All competitors already in the mountain bike market Reduced barriers to entry, existing brand and

product reputation No diversity in revenue streams

Profits completely reliant on success within mountain bike market

OBJECTIVES & RECOMMENDATIONS

Our Plan… Quality over quantity Customer satisfaction Be innovative Make smarter decisions

OBJECTIVES & RECOMMENDATIONS

Financing Increase our sales by 10% (20 million) Have a net profit increase of 30% (2 million) Increase our share value by:

Reducing cost base while maintaining revenue Increase revenue share and reduce cost.

OBJECTIVES & RECOMMENDATIONS

Marketing Launch a new product

Youth Bike Road Bike

Increase our advertisement expenditure

Increase our supply by 8%

OBJECTIVES & RECOMMENDATIONS

Operations Maintain our efficiency level and quality

index Decrease our COGS Introduce intellectual property