Fraser White 201103398Zac Hannam 201103841Andrew Graham 201202808Nick Parker 201105744

Spoke City

…Any Distance is Biking Distance

Overview•Sales of almost $13,000,000•Costs of goods sold just under $6,000,000•Profit of almost $2,500,000•Shareholder value of $26.04•Earnings per share $2.41 •34,349 units sold

2018 2017 2016 2015 2014

Sales Revenue

$12,998,862 $12,716,405 $14,786,655 $9,213,750 $8,589,750

Cost of Goods Sold

$5,945,751 $5,848,518 $6775814 $4283422 $4,004,826

Gross Margin

$7,053,112 $6,867,887 $8,010,841 $4930328 $4,584,924

Expenses $3,939,256 $5,109,010 $3,819,338 $2,167,230 $2,034,120

Net Income $2,409,791 $1,435,128 $3,098,150 $2,052,273 $1,876,734

Income statement

2018 2017 2016 2015 2014

Sales Revenue

100% 100% 100% 100% 100%

Cost of Goods Sold

45.7% 46.0% 45.8% 46.5% 46.6%

Gross Margin

54.3% 54.0% 54.2% 53.5% 53.4%

Expenses 30.3% 40.2% 25.8% 23.5% 23.7%

Net income 18.5% 11.3% 21.0% 22.3% 21.8%

Vertical Analysis of Income Statement

2018 2017 2016 2015 2014

Sales Revenue

2.2% -14.0% 60.5% 7.3% 4.0%

Cost of Goods Sold

1.7% -13.7% 58.2% 7.0% -6.0%

Gross Margin 2.7% -14.3% 62.5% 7.5% 14.7%

Expenses -22.9% 33.8% 76.2% 6.5% -1.2%

Net Income 67.9% -53.7% 51.0% 9.4% 32.0%

Horizontal Analysis of Income Statement

Balance Sheet2018 2017 2016 2015 2014

Current Assets $18,067,015 $15,131,895 $14,290,071 $10,610,313 $8,335,187Non-Current Assets

$968,551 $1,076,168 $1,195,742 $1,328,602 $1,476,225

Total Assets $19,035,566 $16,208,063 $15,485,813 $11,938,915 $9,811,412Current Liabilities $1,032,767 $615,055 $1,327,933 $879,546 $804,315Non-Current Liabilities

$1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000

Total Shareholders Equity

$17,002,799 $14,593,008 $13,157,880 $10,059,370 $8,007,097

Total Liabilities and Shareholder’s Equity

$19,035,566 $16,208,063 $15,485,813 $11,938,915 $9,811,412

Horizontal Analysis of Balance Sheet2018 2017 2016 2015 2014

Current Assets 19.4% 5.9% 34.7% 27.3% 50.1%

Non-Current Assets

-10.0% -10.0% -10.0% -10.0% -32.5%

Total Assets 17.4% 4.7% 29.7% 21.7% 26.8%

Current Liabilities 67.9% -53.7% 51.0% 9.4% 32.0%

Non-Current Liabilities

0.0% 0.0% 0.0% 0.0% 0.0%

Total Shareholders Equity

16.5% 10.9% 30.8% 25.6% 30.6%

Total Liabilities and Shareholder’s Equity

17.4% 4.7% 29.7% 21.7% 26.8%

2018 2017 2016 2015 2014

Current Assets 94.9% 93.4% 92.3% 88.9% 85.0%

Non-Current Assets

5.1% 6.6% 7.7% 11.1% 15.0%

Total Assets 100% 100% 100% 100% 100%

Current Liabilities 5.4% 3.8% 8.6% 7.4% 8.2%

Non-Current Liabilities

5.3% 6.2% 6.5% 8.4% 10.2%

Total Shareholders Equity

89.3% 90.0% 85.0% 84.3% 81.6%

Total Liabilities and Shareholder’s Equity

100% 100% 100% 100% 100%

Vertical Analysis of Balance Sheet

2018 2017 2016 2015 2014

Current Ratio 17.5 24.6 10.8 12.1 10.4

Debt-to-Equity Ratio

0.120 0.111 0.177 0.187 0.225

Earnings Per Share

$2.41 $1.44 $3.10 $2.05 $1.88

Return on Equity 14.2% 9.8% 23.5% 20.4% 23.4%

Ratio Analysis

•$14,786,655 was Spoke City’s greatest sales revenue, it was generated in the year 2016

•Drop of sales of 14% from 2016 to 2017

•Sales Growth of 2.2% from 2017 to 2018

Key Findings – Sales Growth

•The year 2018, Spoke City had their lowest cost of goods sold, as a percentage of sales, sitting at 45.7%

•Cost of goods sold increased by 1.7% from 2017 to 2018

Key Findings – Cost of Goods Sold

•Return on Equity decreased dramatically from 2016 to 2017, but increased from 9.8% to 14.2% from 2017 to 2018

•Sales have increase by 51% in the last five years

•Net Income increased by 67.9% from the year 2017 to 2018

Key Findings – Profitability

•Spoke City introduced two new products, a Youth bike, and a Road bike

•Main source of income was supplied by Mountain bike (57%)

•Spoke City had the lowest capacity in the industry with a capacity of only 15000

Marketing Results

•Spoke City recorded 0% idle time in 2018, the industry average was 7.7%

•Spoke City recorded a wastage of 14.4%, the industry average was 17.6%

•Spoke City’s product quality index was 75%, the industry average was 85%

Operations Results

Strengths:• Decreasing Debt-to-Equity• Constant Profitability• Increasing sales• Efficiency

Weaknesses:• Shareholder Value• Awareness rating• Product Quality• Capacity

Threats:• Competitors• Clustering of competitors

Opportunities:• New product options

SWOT Analysis

• Decreasing debt to equity• After our first year we had a good ratio of 0.47, which shows investors that we would not be a risky company to

invest in. Since that year our debt to equity ratio has gradually decreased to what it is now, 0.12 after the year 2018.

• Constant Profitability• Our company generated a profit of $1 309 269 in our first year, and since then our profits have been increasing,

aside from 2017, the year after our best year where we generated $3 098 510 in 2016. Last year we had profits of $2 409 791 which was up fro, 2017 by $974 663

• Increasing Sales• Like our profits, our sales have been increasing since year one aside from 2017 after our best year and we expect

sales to continue to increase as we grow.• Efficiency• Our firm became very efficient through the years 2011- 2017. Our idle time was 0% compared to the industry

average of 7.7% and we had a wastage of 14.4% which was 3.3% lower than the industry average. The more efficient our firm can be the more money we will save, maximizing our potential for profit.

Strengths

• Shareholder Value• Currently our shareholder value sits at $26.04 which is less than half of the industry average of $56.22. • Awareness Rating• Of the six companies we have one of the lowest brand awareness ratings in the industry. We are very

close with five of the companies though much below that of X-treme Bikes.• Product Quality• The three bikes that our firm chose to sell are the Adv1, Funksta_2016 and the Annihilator_2017.

These three bikes have some of the lowest product quality ratings around 0.75. The highest rated bikes are the Bolt_2016 and the NinjaX_2016 which are around 0.92.

• Capacity• In 2017 our firm’s capacity was 15 000, this was 25 000 below the highest of Extreme Bikes and

Michael’s Bicycles. This was a major weakness for our firm as it restricted us from being able to meet the demand of our customers.

Weaknesses

•New Product Options•There are many new products available for our company to begin selling

that could help generate more income. The Bolt_2016 and NinjaX_2016 are both very popular bikes with the highest product quality ratings. The NinjaX_2015 was also the most selling bike in the industry recording a total of 64 784 sales.

Opportunities

•Competitors•We are in a very competitive industry with there being five other

companies selling similar products. The two biggest competitors are Michael’s Bicycles and X-treme Bikes whom control the majority of the market, having a combined market share of 61%.

•Clustering of Competitors•Aside from the two majority market holders, there are four other

companies competing to find an edge and have a larger proportion of the market. The four companies range from having a 4.3% to a 16.9% market share.

Threats

Objectives: To improve market share by 3-5% for each of the firms next five years Current market share of 10.3% based on retail dollar sales (4th

in world 3) 

  Continue to increase sales for each of the next five years Except for 2017, sales have increased every year since Spoke

City has opened Sales in our first year (2011) were $8,190,000 and have

increased to $12,998,862 by the year 2018.

Recommendations: To improve market share by 3-5% for each of the next five years the firm must: Increase overall production by 5-10% per year Better forecast demand so firm has inventory and doesn’t miss out on

sales. 

To continue to increase sales for each of the next five years the firm must: Continue to advertise our product effectively Continue to increase the quality of our product

Objectives and Recommendations - General

Objectives: Increase sales of Mountain Bikes by 10% by the year 2020.

Second lowest sales of Mountain Bikes in world 3 Firm’s Mountain Bike price was $139 above average market price Second highest Mountain bike quality in world 3.

 

Increase sales of Youth Bikes by 20% by the year 2020. Lowest firm in terms of sales of Youth Bikes in world 3 in 2018 Only 10% of the Youth Bike market share in world 3

Recommendations: To increase sales of Mountain Bikes by 10% by the year 2020 the firm must: Lower the quality of the Mountain bike Lower the price of the Mountain bike to average market price Increase internet advertising of the Mountain Bike by $100,000

 To increase sales of Youth Bikes by 20% by the year 2020 the firm must: Increase public relations through TV, Internet and Magazines by

$300,000 Increase advertising by $100,000 and target the teen generation

Objectives and Recommendations - Finance

Objectives: Increase the firms Awareness to 0.20 for Mountain, Road and Youth bikes by the year 2020 The awareness of Spoke City’s products is the lowest in world 3 The awareness sits at 0.11 for Road Bikes, 0.21 for Mountain Bikes and

0.19 for Youth Bikes 

Increase public relations on our road bike to 0.30 by the year 2019 In 2018 our PR was 0.05 for mountain bikes, compared to the market

average of 0.39 In 2018 we spent $660,000 on Mountain Bike public relations

Recommendations: 

To increase the firms Awareness to 0.20 for Mountain, Road and Youth bikes by the year 2020 the firm must: Increase brand advertising by 150,000

    

To increase public relations on our road bike to 0.30 by the year 2019 the firm must: Increase the amount we spend on public relations from $660,000 to

$1,000,000 

Objectives and Recommendations - Marketing

Objectives: Keep production allocating over 85% of the firms capacity for the next five years 2018 was the first year Spoke City has had over 85% of the firms

capacity allocated to production For the last three years Spoke City has had zero idle time and kept

wastage below 20% 

Start producing a new Mountain Bike, the Hopper, in 2019 Market opportunity More options for customers

Recommendations: To keep production allocation over 85% of the forms capacity for the next five years the firm must: Increase efficiency by $200,000 Increase capacity by $7,000    To start producing a new Mountain Bike, the Hopper, in 2019 the firm must: Inquire new investors Keep an increase of net income

Objectives and Recommendations - Operations

Questions and Answers

Spoke City: Any Distance is Biking Distance