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This assignment need to be revise according to the comments in evaluation summary. due date 9/25/2013.
Please this is the 3rd times I will ask to revise this assignment. I want somebody familier with this assignment and be sure he can do it.
Check The evaluation summery u will find these sections need to be revise ( Internal Controls
Weakness Corrective Actions , Risk, Risk Mitigation , Compliance, Noncompliance Corrective Actions)
u will find all required document in the link:
http://www.homeworkmarket.com/content/financial-analysis-21
Runninghead: SUMMARY REPORT
SUMMARY REPORT 22
Competition Bikes Inc.
TASK 1
Reginald Edrington 8/28/201
3
Table of Contents
Horizontal, Vertical, Trend and
Ratio Analysis
3
Horizontal analysis
3
Income statement
4
Revenue
section
4
Operation Expenses
4
Selling expenses
4
General and Administrative Expenses
5
Balance Sheet
5
Cash and cash equivalent
5
Account receivable
5
Total Current Asset
6
Notes payable and account
6
Stockholder’s Equity
6
Vertical analysis
6
Income statement
7
Revenue
7
Selling expenses
7
General administrative cost
7
Operating income, EBIT and Net Earning
7
Balance sheet
10
Cash and cash equivalent –strength
10
Account receivable
–weakness
10
Current Liabilities – strength
10
Total Current Liabilities- Strength
10
Raw Materials Inventory and work in progress Inventory- weakness
10
Trend analysis
11
Ratio Analysis
12
Current Ratio-Strength
13
Acid Test Ratio- strength
13
Collection period
13
Gross profit margin –strength
13
Working capital
14
Current working capital state
14
Improving working capital
14
Internal controls
15
Corrective action
15
Risk of weakness
15
Sarbanes-Oxley
15
Sox compliance
15
Good requisition
16
Purchasing
16
Receiving
16
Transaction documentation
16
Bibliography
17
Horizontal, Vertical, Trend and Ratio Analysis
The evaluations of the financial health of Competition Bikes, Inc. (CB) are resultant using the attached income statements and balance sheets. It is focusing on FY 6, FY7 and FY8 to measure the growth and stability of this firm.
The period between the FY 6 and FY7, Competition Bikes, Inc. had a significant growth in new earnings that was not extended on into FY 8. Transfer of positive net profit of 313.4 % to a huge loss of 81.6%.
Horizontal analysis
This is an analysis techniques used on financial statement to show the changes in the number of matching financial statement items for a period. It is essential in evaluating trend situations. Horizontal analysis uses financial statement for two periods or more. The base period is usually the earliest period and items on all financial statement for the period that follows are compared to the items on the base period financial statement. Importance of horizontal analysis is that it aids in identifying performance issues and allows for trends detection. Having the background information is essential to avoid drawing conclusion on the analysis itself because this can be misleading without any context.
CB reduced the accounts receivable account by 15 %. The horizontal analysis of the current assets displays that the assets have grown 16.5% from FY7 to FY8. The outcome of collecting on accounts receivable was an infusion of $ 107,640 dollars. The cash balance ornament 275.4%. Analysis displays that the accrued devaluation was reduced by $ 230,000 or 50%. The total assets were reduced by 0.1% or $2, 400.
Income statement
Revenue section
In the income statement strength is the clearest change of growth observable in the net sale difference from the FY9 to FY10 of up to 1%. This is very substantial for the company and indicates strength or positive results. in addition to this, another strength is seen in the sale of goods which is proportional to cost incurred in purchase of goods here the marginal difference between the financial year 2009 and 2010 is 1% . This indicates raise and fall of cost of goods versus sales from this information we can deduce that profit can be increased by reducing the cost of goods.
Operation Expenses
The operational expenses seen a 3.6% drop. This drop was not equivalent to the reduction in income. Management must retain expenses related to sales income. If they had kept in line the operational expenses would have dropped in lieu of increased. There are rare areas of anxiety within this area that must be addressed.
Selling expenses
An increase in advertising is meant to mark a strength in the company, this because an increase in the advertisement means that the company brand is recognized widely and its visibility broadened. However, there was a decrease in advertising of 8.3% from the FY9 to FY10 this indicate a weakness. Since the company deals with sales, its sales are affected by decline in advertisement since the customers will not be able to know when a new commodity hits the market. Thus, I recommend that more funds to be directed towards advertising. Strength here is seen through the fact that there was a fluctuation of the accounts up and down proportionally to the net sale, which shows good management in selling expense.
General and Administrative Expenses
Administrative and general expense in the financial income statement is the most crucial source of concern. An important strength in this case is the decline in expenses of 3.5% from the FY9 to FY10. This means that the company has finer control especially when the sales are trending downward. In addition to this across all the years the other general expenses are constant this means that there is no need to review the accounts for content nor make any consideration for reduction of expense it actually should be left as it is since it is proportional to the sales. When it comes to controlling expenses for both general and administrative, the operating income and total Operating expenses shows strength of the company. Thus, due to the company exercising better control the company G& A expenses fell by 3.5% from FY10 to FY 11.
Balance Sheet
Cash and cash equivalent
There was strength in this area due to an increase of 275.3% in cash from FY7 to FY8 in spite of the decline in net sales.
Account receivable
A weakness is seen due to the substantial increments from FY6 to FY7 of 164.3 this show that the company is inefficient in collecting the outstanding accounts. Thus, the company ought to increase its efforts of collecting outstanding account by maintaining communication with its customers.
Strength is observed in the company from FY7 to FY8 of 17.7% this means that the company has improved its collection of outstanding account.
Total Current Asset
Here strength is observed due to the increase in total assets by 16.5% from FY7 to FY8, this can be credited to improvement in the collection of outstanding accounts.
Notes payable and account
The growth of current assets is by far greater than the liabilities growth which indicates strength. The positive trend of increase of payable accounts across all the year shows that the company is able to leverage and use its debts in financing its assets.
Stockholder’s Equity
Strength here is seen through an increase in stockholder equity, which means that current investors gains high dividend which adds value to the company stock thus making it more attractive to investors. Additionally, increase of the retained earnings means that will not have to give out stock in order to raise capital for operations.
Vertical analysis
Vertical analysis describes the representation of equities, liabilities and assets as a percentage that represents the whole. The three are added up from the balance sheet each of them is expressed in percentage and as representative of the total. Vertical analysis is most appropriate when comparing different sized companies and makes it easy for the observer to determine the company that have high percentage of liabilities compared to equity, or more assets compared to equity and liabilities. Vertical analysis focuses mainly on money distribution over certain duration of time. Thus it enables the company in knowing how money is spent within a certain period of time.
Income statement
Revenue
Strength here is shown through the fact that the cost of goods for three continuous years has remained constant
Selling expenses
The selling expenses are constant over the years, which is strength since it shows that the company is able to carry out its sales efficiently, transportation and distribution efficiently.
Administrative and general expenses weakness this is because 18.4% of each net sale was spent on A&G expenses this expense is far much higher than the previous two years.
General administrative cost
This contains the biggest concern in the company. The company incurs 18.4 cents every sale for general expenses and administrative expenses in the FY7 and FY8 this kind of expenses should be controlled furthermore the company should introduce quarterly budget in order to review expenses constantly.
Operating income, EBIT and Net Earning
For FY6,FY7 and FY8 all the above show a trend going downward this can be attributed to the high cost the company incurs for general and administrative expenses. However, after the implementation of expense control these changes and the company starts having an increase in operating income, earnings before income tax and net earnings.
Gross sales profit is a gauge of the firm’s profit on all goods sold. The meaning of this number is maintaining market share and the feasibility of the product. Gross sales allow for a cash influx to maintain operations. An analysis identifies weaknesses to deliberate latent preparations desirable to raise the gross profit ratio.
The gross profit is straggling down. This is after a record FY7. This creates anxiety, mainly when compared to FY6 when the gross profit was 26.6%. A gross profit of 27% is measured a nice sensible profit. CB needs to pay specific care to this decrease. A decrease in gross profit is a decrease in market share, cash flow and will affect CB’s net earnings. This decrease will affect the ability to generate cash reserves.
Assets for FY6 are 24.5 cents out of every dollar and total liabilities are 47.5%, and for FY7 were increased to 31.9 cents. This was possible by the accounts receivable increasing from 6.5% to 16.6%. Liabilities declined to 46.7%.
As you see in the above table, the financial statements demonstration that operating expenses are 25.1% of every dollar made by CB. These expenses include sales expenses, general and administration expenses.
General and administration expenses augmented gradually. Precisely, there was upsurge in the cost of general and administration expenses from 15.5% to 18.4%. One distinguished cause for this upsurge was that salaries were increased in FY8.
Executive Commissions increased from FY7 to FY8. Sales income needs to be unswervingly associated to sales profits. This may be a gauge of CB not being in financially good health in the near future. If their salary was unswervingly linked to their net profit, then the percentage would have stayed steadier.
The cost of general and administration expenses ornament in FY8 by $12,000 or 0.7%. This Figure is an extra pointer that the financial health of CB is deteriorating.
These ratios should be of major anxiety to CB. They are breaking even between sales and expenses. This slight margin is revealing that expenses are too high. The 2.6% reduction in net earnings is below their preceding FY6 net earnings.
Balance sheet
Cash and cash equivalent –strength
In FY8 the company had 10.3% of cash making up the assets. The advantage of having cash is the company is able improves its credit and liquidity capabilities. This strength can be accredited to gatherings of strong sales in FY7 and to good collection activity for FY8.
Account receivable –weakness
There is high amount of receivable account, which makes up assets meaning that every dollar making up the asset is owed by the company through receivables. A total 16.6 cents in year 7 and 14.1 cents of every plus dollar is owed to firm through it receivables. The amount is not too high but it can be improved.
Current Liabilities – strength
The most of the firm’s liabilities are made up for long term possessions (building, landing, equipment). That will help the firm maintain very good liquidity ratio and assistances to gain favorable credit and financing terms with vendors and lenders.
Total Current Liabilities- Strength
It is trending down from 47.5% for FY6 to 46.7% for FY7 and 45.9% for FY8.This is principally due the circumstance that the mortgage payment is releasing more debt than the firm is suffering it through payables.
Raw Materials Inventory and work in progress Inventory- weakness
1- Though the firm does not preserve any finished product in its inventory.
2- It does need to purchase and inventory raw materials for production.
A weakness can be observed in:
· High amounts of raw materials 2.1% for FY7 and FY8
· Work in progress inventory 3% for FY7 and FY8
Recommended to review of the purchasing and inventory areas so current material levels are anticipated in future material purchase. This will lead to lower inventory levels and upsurge the bottom line.
Trend analysis
The trend analysis given has a weakness because there is no pattern of Net Earnings and Net sale for FY6, FY7, and FY8. In addition, the projections fails to reflect the company past performance the cause of decrease is the high expenses cost. The company can resolve this by increasing funding and reviewing sales projection.
In the spite of the fact that the business had sales drop at FY8, the business was talented to increase sales by 33.3% among FY6 to FY7. In order to increase the firm’s profits;
· The management must have to recover IT operations.
· The business must cut costs to be able to uphold their profits.
· The company must assess its current responsibilities to ensure that the debt ratio in proportion to their revenue (Graham, 2004).
· The business must assess its production, advertising and processes departments to ensure that they are effectively carrying out their business.
If the overhead issues are considered and addressed, the business will likely recover and be able to work effectively which eventually increase sales and gross profit. Analysis of trends in percentages shows that the company is in FY9, FY10, and FY11 will be capable to encounter its business objectives and preserve a profit.
Following trend analysis was completed to assess CB net sales profits for FY8, FY7, and FY6:
In above table, when we compared the Net Sales between FY8 and FY7, we found that the Net sales decreased in FY8.
Sales should endure to growth annually, to establish the stability of the firm and the viability of the product.
Compared Cost of Goods Sold – In FY 8, the Cost of Goods declined compared to FY7.
For FY8, the trend shows that the cost of goods is decreased but is not in line with the decrease in sales. The Cost of Goods requests to be assessed to assure that the proper pricing of the goods is in line with the sales point of the merchandise.
In EBIT and net earnings, FY7 delivered the trend boost with a 413.4% rise in growth. This was due to the wonderful growth in sales. In FY8, EBIT and Net Earnings were melodramatically abridged even below FY6. This is of major concern. Although sales were decreased, operating expenses were not decreased to produce a better EBIT and net earnings.
Decrease in expenses should have been made during the year as the decrease in sales was identified.
The trend analysis for FY8, compared to FY 7. Policy change may be required when sales are reducing and expenses are growing. This simple business fact produces a strong EBIT and net earnings bonus.
Trend analysis for future years, FY11, FY10, FY9, and FY8
The trend % is 100% for FY6 (it is base year), for FY7 is 133.3%, and for FY8 is 113%, although lower than FY7, but it is still higher than FY6.
This trend analysis shows sales in FY8 were 13.3% of FY6 sales. This characterizes growth in balance over a three year period. The outcomes are a favorable impact to the firm. The trend is less favorable in the next three years. From FY8 to FY11, the trend analysis is only an 11.8% growth in sales. This is lower than the previous three-year period.
This would still be a favorable impact for CB. The firm will recover from its FY8 losses. They need to be aware and pay attention to their operating expenses to assure profitability.
Ratio Analysis
This is a form analysis for financial statement used in obtaining the performance of a firm financially in quick way. Ratios are classified into short-term solvency, Asset Management, Profitability, Market value and Debt Management Ratios. Ratio analysis is important for evaluating performance, creditworthiness, debt, payment performance, collection performance and inventory efficiency.
Current Ratio-Strength
In the FY8 the current ratio was 5.35 which mean that the company current asset for each dollar of liabilities was $5.35 which is strength. In addition to this ratio also shows that the company can increase its assets in its operations and manage to maintain a significant current ratio.
Acid Test Ratio- strength
The current acid test ratio is 4.25 this is higher than the norm manufacturing ratio of 1.0 which means that it is a company strength. This ratio is paramount in aiding the company in finances and investment.
Collection period
This is a weakness because the company is slow in collection of accounts. The company average collection period is 43.8 day while the competitor is only 32.5 meaning that the company should improve its collection period.
Debt Ratio- strength this is strength because it is way below the normal figure of 57-67. The company only has a debt ratio of 45.9% which means that it has more room for using debts to finance its operations.
Gross profit margin –strength
The gross profit margin is constant at 27% (FY8) and compared to competitors which are 32.1% in the same period we can say that it is strength. Because the company can still increase commodity prices and still remain competitive.
Working capital
Current working capital state
Working capital is composed of current assets deduct current liabilities and it resemble available for generating revenue and conducting the business. From the table we can deduce that the company does meet the terms of collection of the outstanding accounts, which is a weakness. To improve working capital the company can amend and renegotiate the working terms with suppliers.
The company working capital is above 1.5 million from the year FY6 there is an upward growth in the working capital and cash in hand. This is because the company has implemented new measures that ensure that customers pay their debts on time. It takes the customer an approximate 46.7 days to settle their debts.
Improving working capital
This can be done by revising better terms with the suppliers. The company can also improve working capital by improving its method of collecting outstanding accounts. The company should also revise the terms of credit for client who fails to pay as agreed whereby they should be charged higher.
Internal controls
Internal controls are the organizational plan and all the related measures to:
· Safeguard Assets
· Encourage employees to follow company policy
· Promote operational efficiency
· Ensure accurate, reliable accounting records.
Internal controls are very important for a company. Companies need to find a process and plan that will work best for their company.
By taking a quick look at the purchasing system it seems to separate all the different departments to insure all the right policies are followed. I would recommend the following changes in the process.
The purchasing department will issue a purchase order to the supplier based on the monthly budget projections. It is not listed where the budgeting projections came from. This needs to be identified, so everyone knows who is in charge of the projections. It should also be listed in the process exactly what suppliers the order will be forwarded to. You do not want to leave it up to purchasing department.
Purchasing
checks with three sources for similar quality materials and selects the low bidder from the three. There needs to be a check in place to verify that three bids were accepted, and the lowest one was take. Without this check there is no way to tell if the lowest bidder got the order. There also needs to be an explanation of the bidding process.
Does the purchasing department just pick three suppliers?
Is there a list?
This needs to be explained.
The purchase order is sent to the supplier by the purchasing department on the 1st of projected month. There needs to be verification the lowest bid was accepted. The purchase order also needs to be verified by someone. This is to make sure the right amount was ordered.
Upon receipt of the goods they will be brought to the production line for use during the month. This does not explain how they were received.
Did someone verify the amount?
Someone needs to check the order for accuracy. The items received needs to be checked against the items that were ordered. This way you know you are paying for.
Any unused parts are sent to the raw materials inventory stores on the last day of the month. There needs to be a check against the inventory that was used, and the inventory that is being sent to the inventory stores. This should be done to make sure no inventory is getting lost or stolen. The company also needs to look into why there is extra inventory being ordered. You want to try to order just enough inventories for the month. Is should also be explained where the inventory stores are, also what they are.
Purchasing sends the suppliers invoice to according and accounting writes a check to pay the invoice. The accounting department needs to have a check done to verify the checks are being sent out, and that the checks were sent out for the right amount.
The purchasing department ought to requisition form to pay for purchases. This will play a great role in avoiding possible fraud.
Separation of duties generates checks and balances system. This greatly decreases the ability to misappropriate items from the company. The internal controls state that the purchasing department will issue the purchase order. The spending of firm funds is under inspection by auditors and is resultant in misinformation about the firm’s financial strength. The prevention of theft and fraud is supreme in an assembly firm.
The audit shows the purchase order system as maybe the single largest problem in the firm. Many individuals can access the system and produce a payment. The firm is weak to untold losses. Problem, the purchasing department controls the selection of vendors, purchasing materials and the receiving of materials. This system only affects to the budgeted transactions. The purchase agent authorizes to purchase and issues the purchase order based on budgeted amounts. There is not a solid policy to protect or assure the receipt of goods authorized in the purchase order. The end effect is goods being received that were not ordered or required.
Corrective action
The person in charge of the budget ought to give a request for purchase using a form for requisition in order to make purchases for materials in accordance to the drafted budget.
CB to be compliant with SOX needs to implement the following:
· Establish processes and policies to an independent or management review of the three sources who are bidding for the vendor supplier work, to discourage the favoritism of one of three sources.
· Establish a separate entity for the physical writing of the purchase order.
· Implement policies for accurate confirmation of the invoice and the goods. Establish policies to insure that the goods ordered were delivered. Appropriate payment of the invoice.
In more details, CB needs to have a process that includes inventory control and verification of every step to make sure their plan is used to its fullest. I will list the steps that should be taken to make sure this happens.
a) There should be requirement to come up with how many suppliers are needed to be ordered. The inventory should be compared to the planned production, and what is on hand from the previous month. The request should be created after this is done. The production manager should approve this order then send it purchasing.
b) There should be a list of suppliers that are too be used by the purchasing department. The purchasing department should then submit the purchase order to these suppliers. A different employee should then take those bids, and review them. The purchasing manager should also review the bids, and pick the best one.
c) The purchasing manager should then submit the purchase order to the chosen vendor at the 1st of the month.
d) When the suppliers are received they should be checked against the purchasing order. While this is being done the inventory should be entered into the inventory system. If there are any issues there should be taken care of at this time.
e) As suppliers are being used in production they should be entered into the inventory system.
f) At the end of the month the inventory that is left over should be compared to the inventory system to make sure everything is accurate.
g) The suppliers then need to be documented as left over, so then they can be accounted for when ordering supplies for the next month.
h)
The accounting department should be sure all the appropriate steps were followed. They should also make sure that all required documents are accounted for. Payment should then be prepared. The accounting manager should verify the payment was made, and the appropriate amount was paid.
Risk of weakness
The risk that can result from these purchases is fraud and unauthorized purchases
The risk can be mitigated by implementing a process for purchasing in order to ensure the purchasing department only gives authorization for purchases.
Financial-
· The purchasing from a non-qualified resource.
· The receiving of unapproved goods.
Delivery of unnecessary goods in conflict with the Just-In-Time strategy, the receipt of goods that are not timely delivered causing assembly delays.
Risk Mitigation
Buying from a non-qualified source, the requirement to implement policy on review of three bids that include an independent review of the source bids in relation to
compliance
and
independence from resource
Implement management approval and review of all selections of potential sources to insure policy compliance and to eliminate the potential for purchases being aligned with internal resources.
Implement policy concerning the receiving of unapproved goods and receipt of all goods.
Implement policy and process concerning appropriate receipt of goods so that goods are received according to scheduled purchases. Fraudulent invoices being paid would be eliminated if the process has several checks and balances.
Sarbanes-Oxley
This was an act created in the year 2002 with an aim of ensuring accurate financial information is reported by public companies.
Sox compliance
The fact that the purchasing department makes purchases from the budget means that the internal control is deficient and fails to comply with SOX. Thus for the company to claim that its internal control are sufficient it must first comply fully with SOX requirement.
This the company can achieve by allowing the purchasing department to receive requisition. Additionally the company ought to issue documented transactions.
Correction Action Sox compliance should address the following in internal controls
Good requisition
There is a need for the company to set up a requisition system that ensure that only the person with the budget authority makes request for the goods needed
Purchasing
The department for purchasing should be the only one with authority to issue purchase orders, and ought to avoid invoicing, requisitioning or receiving.
Receiving
There is a need for the company to put up a receiving system, which checks on received merchandise, and give report to purchasing, accounting, and requisitioning party.
Transaction documentation
The company ought to issue out forms which are numbered and showing all purchasing, requisitioning, payment and receiving process in order to ensure that all accounting transactions are properly traced
Noncompliance Actions
Material Weakness
There have been several Material weaknesses in CB financial statement;
1. Shortage of internal controls in violation of SOX “establishing and maintaining adequate internal control over financial reporting” (SEC, 2003);
2. With disappeared inventory, an assessment of its liquidity is overstated. “Issued an attestation report on management’s assessment of the company’s internal control over financial reporting” (SEC, 2003).
Recommendations for corrective actions for noncompliant with the Sarbanes-Oxley requirement
Sox Section 404 – Contract an independent auditor to assess Competition Bikes Inc., internal controls.
Sox Section 906 – Strict requirements of adherence of corporate responsibility for financial reports.
The directive states that “Management is responsible for ensuring the internal control Processes to prevent material misstatements from being reported in the financial statements” but does not report on the precise internal controls over the financial reporting nor identify the framework that was used to assure and assess the internal controls.
The letter does not provide details in its valuation that internal controls are effective. Simply stating that it is effective based on the COSO is not enough since COSO Internal Control-Integrated Framework states that “material weakness is considered in relation to an entity’s financial reporting objective…” (COSO, 2011)
In Summary of: non-compliance corrective actions. A check and balance of all purchase orders and received goods would lighten the common of compliance and profitability concerns. A thorough implementation of Just- In –Time strategy for raw materials would move CB into a more profitable venture.
Bibliography
Alan A. Bevan & Jo Danbolt, (2000). Capital structure and its determinants in the United Kingdom: a decomposition analysis. Working Paper University of Glasgow.
COSO. (2011 Dec). Internal Control – Integrated Framework. Committee of Sponsoring Organizations of the Treadway Commission (COSO). Retrieved from http://www.ic.coso.org/download.aspx
Evaluation Summary for Financial Analysis: JET Task 1
Final Score:
Does not Meet
Overall comments:
Please confer with a course mentor before working further on this assessment. The submission provides a reasonable evaluation of the company based on the historical and forecasted sales trend. In addition, risks are identified that result from weaknesses in the purchasing controls. The other remaining task prompts, however, require some additional analysis, clarification, or support as described in the detailed evaluator comments.
Detailed Results (Rubric used: JET Task 1)
Articulation of Response (clarity, organization, mechanics)
(0) Unsatisfactory
(1) Needs Revision
(2) Satisfactory
The candidate provides unsatisfactory articulation of response.
The candidate provides weak articulation of response.
The candidate provides adequate articulation of response.
Criterion Score: 2.00
A1a. Horizontal Analysis
(0) Unsatisfactory
(1) Needs Revision
(2) Satisfactory
The candidate does not provide a logical evaluation of the company’s strengths and weaknesses based on the horizontal analysis results.
The candidate provides a logical evaluation, with insufficient support, of the company’s strengths and weaknesses based on the horizontal analysis results.
The candidate provides a logical evaluation, with sufficient support, of the company’s strengths and weaknesses based on the horizontal analysis results.
Criterion Score: 2.00
A1b. Vertical Analysis
(0) Unsatisfactory
(1) Needs Revision
(2) Satisfactory
The candidate does not provide a logical evaluation of the company’s strengths and weaknesses based on the vertical analysis results.
The candidate provides a logical evaluation, with insufficient support, of the company’s strengths and weaknesses based on the vertical analysis results.
The candidate provides a logical evaluation, with sufficient support, of the company’s strengths and weaknesses based on the vertical analysis results.
Criterion Score: 2.00
A1c. Trend Analysis
(0) Unsatisfactory
(1) Needs Revision
(2) Satisfactory
The candidate does not provide a logical evaluation of the company’s strengths and weaknesses based on the trend analysis results.
The candidate provides a logical evaluation, with insufficient support, of the company’s strengths and weaknesses based on the trend analysis results.
The candidate provides a logical evaluation, with sufficient support, of the company’s strengths and weaknesses based on the trend analysis results.
Criterion Score: 2.00
Comments on this criterion: The paper identifies a strength in the overall growth in sales between years 6 and 8. The forecasted sales trend is noted as producing lower expected growth than the historical sales trend. The evaluation of the company based on the sales trend analysis is reasonable.
A1d. Ratio Analysis
(0) Unsatisfactory
(1) Needs Revision
(2) Satisfactory
The candidate does not provide a logical evaluation of the company’s strengths and weaknesses based on the ratio analysis results.
The candidate provides a logical evaluation, with insufficient support, of the company’s strengths and weaknesses based on the ratio analysis results.
The candidate provides a logical evaluation, with sufficient support, of the company’s strengths and weaknesses based on the ratio analysis results.
Criterion Score: 2.00
A2. Working Capital
(0) Unsatisfactory
(1) Needs Revision
(2) Satisfactory
The candidate does not provide a plausible analysis of the working capital of Competition Bikes Inc.
The candidate provides a plausible analysis, with insufficient support, of the working capital of Competition Bikes Inc.
The candidate provides a plausible analysis, with sufficient support, of the working capital of Competition Bikes Inc.
Criterion Score: 2.00
A3. Internal Controls
(0) Unsatisfactory
(1) Needs Revision
(2) Satisfactory
The candidate does not provide a logical evaluation of the internal controls for the Competition Bikes Inc. purchasing system.
The candidate provides a logical evaluation, with insufficient detail, of the internal controls for the Competition Bikes Inc. purchasing system.
The candidate provides a logical evaluation, with sufficient detail, of the internal controls for the Competition Bikes Inc. purchasing system.
Criterion Score: 1.00
Comments on this criterion: The suggestion that the purchasing department has authority over too many duties is appropriate. In addition, the observation regarding weakness in the receipt of goods is on the right track. Please note that the discussion regarding receipt of goods is not sufficiently supported to adequately describe the weakness. In addition, other significant aspects of the purchasing controls are missing from the evaluation. Please continue to develop the response.
A3a. Weakness Corrective Actions
(0) Unsatisfactory
(1) Needs Revision
(2) Satisfactory
The candidate does not provide an appropriate recommendation of corrective actions for any weaknesses.
The candidate provides an appropriate recommendation, with insufficient detail, of corrective actions for any weaknesses.
The candidate provides an appropriate recommendation, with sufficient detail, of corrective actions for any weaknesses.
Criterion Score: 1.00
Comments on this criterion: The recommendation to “implement policies for accurate confirmation of the invoice and the goods” is reasonable but not adequately supported. Also, after the evaluation of the purchasing controls is further developed, please revise to include additional appropriate recommendations of corrective action for other weaknesses identified.
A3b. Risks
(0) Unsatisfactory
(1) Needs Revision
(2) Satisfactory
The candidate does not identify the risks to the company.
Not applicable.
The candidate identifies the risks to the company.
Criterion Score: 2.00
Comments on this criterion: Fraud and unauthorized purchases are both reasonable risks that could arise from weaknesses in the purchasing controls.
A3bi. Risk Mitigation
(0) Unsatisfactory
(1) Needs Revision
(2) Satisfactory
The candidate does not provide a logical discussion of how to mitigate the risks arising from internal control weaknesses.
The candidate provides a logical discussion, with insufficient support, of how to mitigate the risks arising from internal control weaknesses.
The candidate provides a logical discussion, with sufficient support, of how to mitigate the risks arising from internal control weaknesses.
Criterion Score: 1.00
Comments on this criterion: The paper briefly identifies some risk mitigation suggestions. Please note that the suggestions provided are very brief and lack significant discussion to describe them. Please revise this aspect following a more thorough evaluation of the purchasing controls to provide additional suggestions for ways to mitigate the risks that arise from weaknesses in the controls.
A4. Compliance
(0) Unsatisfactory
(1) Needs Revision
(2) Satisfactory
The candidate does not provide a plausible analysis of compliance with Sarbanes–Oxley requirements.
The candidate provides a plausible analysis, with insufficient support, of compliance with Sarbanes–Oxley requirements.
The candidate provides a plausible analysis, with sufficient support, of compliance with Sarbanes–Oxley requirements.
Criterion Score: 0.00
Comments on this criterion: The paper appropriately notes that the company is not compliant with Sarbanes-Oxley requirements. However, the suggestion that the noncompliance occurs because “the purchasing department makes purchases from the budget” is not clear. Please revise to provide a plausible analysis for the reasons for CBI’s noncompliance with Sarbanes-Oxley requirements.
A4a. Noncompliance Corrective Actions
(0) Unsatisfactory
(1) Needs Revision
(2) Satisfactory
The candidate does not provide an appropriate recommendation of corrective actions for noncompliant areas.
The candidate provides an appropriate recommendation, with insufficient detail, of corrective actions for noncompliant areas.
The candidate provides an appropriate recommendation, with sufficient detail, of corrective actions for noncompliant areas.
Criterion Score: 1.00
Comments on this criterion: The suggestion to address material weaknesses in the purchasing controls is a reasonable recommendation to address noncompliance. Following a revised analysis of the company’s compliance with Sarbanes-Oxley requirements for prompt A4, please reconsider this aspect and provide additional recommendations of corrective actions for noncompliant areas identified.
B. Sources
(0) Unsatisfactory
(1) Needs Revision
(2) Satisfactory
When the candidate uses sources, the candidate does not provide in-text citations and references for each source used.
When the candidate uses sources, the candidate provides appropriate in-text citations and references with major deviations from APA style.
When the candidate uses sources, the candidate provides appropriate in-text citations and references accurately or with only minor deviations from APA style, OR the candidate does not use sources.
Criterion Score: 2.00
