Tire City Case Analysis

The Case
The case is about Tire City Company which is increasing its warehouse capacity. In case there was given the background of Tire City and its future plan in terms of expansion. It also highlighted the past relationship with a bank called Midbank with whom company used to take loan for the purpose of expansion. The case also describes the financial need, the financial statement of the company before the expansion and the impact of expansion of warehouse capacity on various aspects of financial statement.

The Company:
Tire city was a retail distributor of automotive tires in northeastern United States and was growing rapidly. It has chain of 10 shops located throughout the USA. Bulk of Tire city inventory was managed at a central warehouse outside Worcester, Massachusetts. Company expanded earlier in 1991 by building ware house and is planning to increase its capacity by investing $2400000 by taking loan from Midbank. Company had sales of $23505000 in year 1995 and sales grows at a compounded annual rate of 20%.

The issue:
Jack Martin the CFO of the company wants to develop a pro forma financial statement for the company and wants to estimate the income statement and balance sheet after the expansion of warehouse for the year 1996 and 1997.

The Analysis:
By considering the projected sales value and other facts given in case the Financial statement will as follows:
Pro-forma Financial Statements INCOME STATEMENT 1995 Percent of Sales 1996 1997
Net sales 23,505.00 28,206.00 33,847.00
Cost of sales 13,612.00 0.58 16,334.40 19,601.16
Gross profit 9,893.00 11,871.60 14,245.84
Selling administrative expenses 7,471.00 0.32 8,965.20 10,758.18
Depreciation 213.00 213.00 333.00
Net interest income 94.00 97.00 124.00
Pre tax income 2,115.00 2,596.40 3,030.66
Income Taxes 925.00 1,134.63 1,324.40
Net Income