For the current year (2018): Sales ($): $50,459,200 Sales (Units): 106,572 Costs: $23,037,106 Profit: $13,948,855 Shareholder Value: $120.65 Earnings per Share: $12.83 X-treme Bikes used a high quantity low price marketing strategy.
Current Ratio Analysis: In the year 2014, X-Treme bikes firm’s solvency was 8.6. In the year 2015, our firm’s solvency was 6.8 In the year 2016, solvency dropped slightly to 5.9. In the year 2017, solvency had raised to 7.7. In the year 2018, the final year of simulation, our firm’s solvency was 7.3. Conclusion: Solvency consistently greater than 2. Assets should not have a problem covering our liabilities
Debt-to-Owner’s Equity Ratio: X-Treme Bikes’ D/E for the year 2014 was 0.12. In the year 2015, D/E was at 0.08. In the year 2016, D/E was 0.04. D/E for the year of 2017 was 0.03. In the final year of 2018, D/E was 0.02. Average D/E for the final year was 0.18. our firm’s ratio is low, so there is a very low risk of investing in our company.
Return On Equity: Our firm’s ROE for the year 2014 was 0.27, or 27%. In the year 2015, our firm’s ROE was 0.32, or 32%. ROE for the year 2016 was 0.42, or 42%. In the year 2017, ROE dropped back down to 0.32, or 32%. In the final year of 2018, ROE was 0.33, or 33%. We can see that for every share of equity, shareholders will earn 33% of the firm’s net income judging by the final year of simulation.
Return On Sales: In the final year of 2018, average ROS in the industry was 0.24, or 24%, putting us above the average in the final year of simulation, which is another way of showing that our company is very profitable. We can see that our ROS is above average in all of the other years as well. This shows that our company is very consistent.
Earnings Per Share: In the year 2014, X-Treme bikes’ Earning per share were $2.29. In the year 2015 our firm’s EPS was slightly higher, at $3.91 per share. In the year 2016, our firm’s EPS raised greatly to $9.23 per share. In the year 2017, EPS had risen to $10.98, approximately $11.00 per share. In the final year of 2018, EPS for our firm had risen to $12.83 per share. In each year, our EPS were higher than the average EPS of our world. From the years 2016 to 2018 in particular, our EPS were more than twice the average EPS for our world. This indicates that our company is consistently very profitable.
To conclude, upon observation of our firm’s overall financial analysis, our profits have increased year by year. Our shareholder value is leading in our world at $120.65. Our short term solvency ratio was higher than the break even point of 2 each year. Our long-term solvency is also very good, decreasing year by year.
Market Summary: ADV3 Mountain Bike: $700, 32,796 units sold 25% of total market Bolt Road Bike: $2,300, 9,000 units s0ld Ninjax Youth Bike: $300, 64,784 units sold 37% of total market
For all three types of bike, there is a negative correlation between price and sales volume. Factors like advertising, public relations, quality have a positive correlation with sales volume. These factors have different sensitivities for different types of bikes.
Our Strategy was to sell for low price but at a large quantity of sales. We were able to push our bikes into the market by making customers demand them and forcing stores to keep them in stock.
We had the second lowest cost of goods sold and below the each year’s average. For each year we have the highest total capacity, far higher than average. From 2015 to 2018 our factory didn’t have any Idle time left, that indicate the market demand for our 3 kinds of bicycles is farm more great than the bicycles we produced.
Our final product improvement spends $10,900,000 and the average spending for product improvement was $3,386,621. Our company did 8 product improvements which was 5 higher than the average of 3.
Key Cost Drivers Three factors that increase our costs are total capacity increase, efficiency increase and quality. The larger total capacity we have, the more money we need to spend on quality. There is a positive correlation between these two factors. One factor that decreases our costs is product improvement. We can decrease the cost for each unit by developing the saving cost style bike.
Our firm proved to be the most profitable in the final year of the competition. In 2018, our net income was $13,948,855, which put our firm’s income at more than double what the industry average. Our firm’s shareholder value in the final year was $120.65. This was the highest in our world. X-Treme bikes’ overall brand awareness was significantly higher than all of the other firms’ brand awareness. Ours being around 42.5% compared to all the other firms at around 26%. We are the second most efficient company in our world at 87%, which is well above the industry average of 75%.
The amount that our firm increased in net income decreased from the first year to the last, from 2014-2015 we increased by 70%, from 2015 to 2016 we increased 146%, from 2016-2017 we increased 24% and from 2016-2017 we only increased 17%, this decline could be considered a weakness for our firm. Our shareholder value is too high for our firm to be able to repurchase our equities. We can decrease our number of shares, but it will cost us a lot of money because of how high our shareholder value is. For our distribution in youth bike market we were below the average in our world. We should have issued our dividends earlier on, making our final Shareholder value in 2018 higher than it is now
As of 2018, our firm has a very large ending cash balance, giving us the opportunity to use this cash to benefit us by purchasing more dividends, increasing our shareholder value every year. We can spend more money on youth bikes advertising to create more awareness for our product. We can produce more bikes to fit the market demand. According to our estimated lost sales and manufacturing idle time we need to increase our total capacity to fit the market demand.
Michaels Bicycles issued dividends earlier in the competition than our firm, in the year 2016, to be specific. The result is that Michaels Bicycles’ shareholder value increases at a quicker rate than that of X-Treme bikes. Because of the fact that our strategy is low price, high quantity, it is possible for other firms to steal our market share when we decrease our price, especially in youth bike market, because the price is very sensitive to sales volume in this market. Other companies like Michaels Bicycles have less capacity than us This allows them to spend less money to improve their efficiency and quality.
Keep capacity at 48,000 units, increase efficiency index to 91.9%. wish to increase our quality to 95% Produce 34,000 units of mountain bike, 66,000 units of youth bike, and 10,000 units of road bike model. Launch new bikes, there are two more available and there is unmet demand to be filled. Keep road bike advantage
Make more money from the youth bike by spending more on advertising.
Increase our sales revenue Use our high cash balance to increase our shareholder value of the next few years.