...Nestor Santamaria MGT 324 Leopoldo Lopez October 22nd, 2012 TIRE CITY Assignment Present Condition of the Firm: Do a profile of Tire City's financial health by calculating the following ratios from 1993 through 1995 * Short Term Solvency or Liquidity: current ratio, quick ratio Short term solvency of liquidity ratios | | | | 1993 | 1994 | 1995 | current asset | 4683 | 5542 | 6548 | current liabilities | 2312 | 2882 | 3218 | Current ratio | 2.02551903 | 1.92297016 | 2.03480423 | | | | | | | | | Current asset | 4683 | 5542 | 6548 | Inventory | 1630 | 1838 | 2190 | current liabilities | 2312 | 2882 | 3218 | Quick ratio | 1.32050173 | 1.2852186 | 1.3542573 | * Long Term Solvency: equity multiplier, total debt ratio, interest coverage ratio Long term solvency ratios | | | | | 1993 | 1994 | 1995 | Total asset | 6580 | 7822 | 8983 | Total equity | 3268 | 4065 | 5015 | Equity multiplier | 2.01346389 | 1.92423124 | 1.79122632 | | | | | Total asset | 6580 | 7822 | 8983 | Total equity | 3268 | 4065 | 5015 | Total debt ratio | 0.50334347 | 0.48031194 | 0.44172326 | | | | | EBIT | 1445 | 1925 | 2209 | Interest expense | 119 | 106 | 94 | Interest coverage ratio | 12.1428571 | 18.1603774 | 23.5 | * Asset Management: total asset turnover Asset Management ratios | | | | | 1993 | 1994 | 1995 | Sales | 16230 | 20355 | 23505 | Total asset | 6580 | 7822 | 8983 | Total asset turnover...
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...Tire City, Inc. is a rapidly growing retail distributor of automotive tires in the northeastern United States. The stores held adequate inventory, on hand, to service all immediate customer demand. The bulk of the company’s inventory was managed at an outside warehouse which was easily serviced by the warehouse. The orders were usually serviced with in a 24 hour period. The company was able to maintain such happy customers since they had fast service and competitive prices. During the previous three years at Tire City, the company had experienced a compounded annual sales increase in excess of 20%. In order to properly anticipate expected growth over the next couple of years, the company was looking to expand its warehouse facilities. Due to the companies rapid growth its current warehouse is bursting at the seams causing a delay in products. The cash flow forecast predicts that 1996 sales, $28,206, will increase to $33,847 for 1997. For every dollar of this increase, $1056.44 net investment in working capital is needed. This investment is used to support higher sales in 1997. Under this set of assumptions, Tire City has excess cash of $273.31 at the end of 1996 given management decides not to create any decision cash flows. This is very unrealistic that management will not take on any decision cash flows. This kind of fast growth rate would require capacity expansion investments. The company needs to start investing 1760.8 in the near future. The negative...
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...Professor Crocker H. Liu | Financial Management, Spring 2000 Tire City Case Frequently Asked Questions | | Note: What I'm trying to make you do is THINK! To read things carefully. To make judgements for yourself without your parents/teachers telling you what to do. This is an INDIVIDUAL project and therefore, anyone who cheats will be given an F in the course. Marine Corp. slogan: The weak quit when they experience pain, the strong quit only when the mission is accomplished. Hawaiian: ho'oikaika Collaborating with Others: * I would like to know if we can work on the case with another student to make things a bit easier and more productive, but still hand in separate copies. If you wish to discuss the case with another student that's fine. However, if you are "borrowing his spreadsheet" and modifying it slightly and/or "lifting his analysis" but putting it in your own words the answer is NO!! It's always easier to work in a group but there is too much free ridership. I HATE remoras (a tiny fish that gets a free ride and free eats but sticking to the belly of a shark). Also, you already know the grade you'll be getting if your report and spreadsheet resemble another student's. I don't make idle threats. In Class Example: * I was wondering whether you were going to post a completed version of the Financial Planning Spreadsheet on the net. As far as posting a completed version of the Financial Planning Spreadsheet on the net, it is already in your Financial...
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...Consultant Role. For this activity, students should assume they are part of a consultancy firm hired to advise the top executives of the organization in the case. Students will have assigned cases. Prepare for oral case discussion according to the guidelines in A Guide to Case Analysis. PowerPoint slides will not be used. Organize the case analysis in three sections: Identification, Analysis, and Recommendations. Identify key strategic issues and analyze the issues with the strategy techniques covered in the course. Formulate recommendations and describe how they are aligned with the company’s mission. Please hand in a two-page report of the case analysis in bullet points. Bring two copies of the report to class. A hard copy of the report is due in the beginning of the class. Students may keep a copy with them for their reference during the case discussion. Upload an electronic copy of the report to Blackboard before class. [pic] Your report should include: • Three sections corresponding to Identification, Analysis, and Recommendations • A concise answer to the Study Questions for the case listed in the syllabus 3 Please type your written assignment and use Times Roman or Calibri 12-point type. Leave top, bottom, and side margins of one inch. Use single line spacing. The first line should include the student’s name. Include a section for references where you list all sources of ideas and information you used to write your assignment. Format your references...
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...Tire City After completing the forecast for Tire City for 1996 and 1997 you can see that the firm is in very good shape. As the Sales increase each year the expenses do not increase at the same level so the net income of the firm continues to increase. With this number increasing the firm will be able to cover the loan for the new building without having to raise too much capital outside. The amount that tire city is expected to spend is $2,400,000 which $2,000,000 of that is accounted for in 1996 and is put into Long term debt and Gross Plant and Equipment. While the remaining $400,000 will be accounted for in 1997. After adding this data along with the increases to sales data we can see that in 1996 to firm will have excess cash in 1996 of 1,505,000 and excess cash of $1,214,000 in 1997. So with looking at this information Tire City should take out the loan because they have the funds to pay it back and they have the line of credit with the bank that will make it cheaper for them. Since they have such an excess in cash they will not only be able to pay off this loan easily but they will be able to pay off the excess on the previous loan easily too. By going with the loan the net income of the company will not go down by a whole lot because the only account that will bring it down will be interest expense. If they were to use the funds that the company had already accrued then they would not be able to give off as much in dividends and that may make the stockholder...
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...Essay on Business Growth and Development Businesses today cannot afford to stand still because of the changes that are taking place in the world. In the ancient times, the population was manageable, and people could use the available resources for the family needs to sustain them. In the modern world and with the changes in technology, there has been difficulty because people are experiencing high living standards and more demand of resources. This study features on ways that a business can use to deliver products that are essential to the population, which rapidly grows in the world, and the adaption methods to both social and demographic changes. It will also outstanding on the technological impact to the business operations and reliability in the ensuring that they meet people’s needs. The development in technology has led to increase in the number of people in the world, leading to faster depletion of resources. This, therefore, necessitates improvement in company production and improved services so that they can be able to meet the increased requirements of the population. These companies also need to adapt to both social and demographic changes to enable them work efficiently and effectively (Wothington & Britton, 2009, 12). Growing firms invest more in Information Communication Technologies (ICTs) and are more efficient in terms of the services and products that they offer. The change in technology has enabled people to get access to services quickly and is of...
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...Current Financial Health Profitability Tire City has shown strong sales growth from 1993-1995. Sales increased 25.42% in 1994, and 15.48% in 1995 respectively. They have improved their profit margin in every year, 1993 had a profit margin of 4.81%, 1994 4.90%, while 1995 has improved to 5.06%. Contributing to this improving margin was a decrease in Cost of Goods Sold as a % of sales, and interest expense as a % of sales. Tire City’s gross profit margin has improved slightly through the years, 1994 saw 41.55% while 1995 saw 42.05% suggesting that Tire City may be charging slightly higher prices or have found cheaper suppliers of tires. Interest expense as a % of sales has decreased due to how they are paying off their original warehouse loan in $125,000 increments. Asset Turnover Assisting the improving profit margin Tire City has seen an improved asset turnover ratio. It has increased every year from 2.47x in 1993, 2.60x in 1994, and 2.62x in 1995. The main improvement for this increase is fixed asset turnover, which improved in 1995 to 9.65x, from 8.93x in 1994. The increase is a result of decreasing planet & equipment as a % of sales. One can conclude that the company purchased a little more plant & equipment; however sales increased significantly thereby increasing fixed asset turnover. A slightly offsetting factor was A/R turnover, it has decreased slightly from 6.58x in 1994, to 6.44x times in 1995. This is due to a longer collection time, which has rose from...
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...To: Mr. Martin From: Calton Chung Date: 2/26/14 ------------------------------------------------- Re: Preliminary Discussions with MidBank Mr. Martin, Even though our sales have been increasing 20% each year and we’re still very profitable, earning 5 cents per dollar we make, we’re still going to need some additional funding from MidBank. As you may have seen in the past few years, Tire City Inc. has been rapidly growing these past few years. TCI has planned to invest money to expand the warehouse in 1996. This investment in our warehouse will fill our chain stores faster to meet customer needs. The company needs external funding because based on my estimations, we can make more profit. Having said that, you can see our financial projections of 1996 and 1997 below in exhibit 1 and 2. | Pojections of 1996 | Total Assets | 15088.00 | Total liabilities | 13674.00 | Cumulative need for funds | -1414 | Exhibit 1 | Pojections of 1997 | Total Assets | 17437.00 | Total liabilities | 15231.039 | Cumulative need for funds | -2207 | Exhibit 2 We would need to come up with $1,552,000.00 from for the first year, and $2,224,000.00 for the following, with a total of $3,621,000.00 I believe this extra funding is necessary because of the long term goals we have for the company. I can understand if you think this might be a little excessive, but I can assure you that this funding is completely necessary. First of all, I kept the...
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... | 12,106 | 13,964 | Liquidity | Current Ratio | 2.03x | 1.92x | 2.03x | Quick Ratio | 1.32x | 1.29x | 1.35x | Leverage | Total Debt/Total Assets | 50.30% | 48.03% | 44.17% | Assets / Equity | 2.01 | 1.92 | 1.79 | Debt / Total Capital | 26.36% | 20.24% | 15.18% | Interest coverage ratio | 12.14x | 18.16x | 23.50x | Here is financial ratio analysis of Tire City. Let’s take a look at each items. Their business performed well in terms of profitability, although ROE did not exceed the number of 1993 in 1995. As a rule, profitability was increasing between 1993 and 1995. Next, when you look at activity ratio, Total asset efficiency was getting better during the period. On the other hands, Inventory turnover and Receivable turnover had same trends; they dropped in 1994 and recovered in 1995. In terms of liquidity, generally there was no big impact on their financial situation since the movement was small. Regarding Leverage, as Tire City paid back the long-term liability, the numbers of ratios changed (Total Debt / Total Assets, Assets / Equity, Debt / Total Capital) and this led to make Tire City have stronger Interest coverage ratio. Flow of Funds Analysis Flow of Funds ($M) | 1994 | 1995 | Net Income | 1.00 | 1.19 | D,D & A | 0.18 |...
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...1). The current financial health of Tire City, Inc. can be determined by looking at its financial statements, and converting the information on them into a number of different ratios, which give analysts information about the financial activities/health of the firm. These ratios include (but are not limited to) the current ratio, acid test, profit margin, total asset turnover, and return on equity. The current ratio measures short term solvency, or the firm’s ability to pay off its short term debt. TCI’s current ratio is 2.03, a healthy indication. This means that for every dollar of short term debt the firm carries, it holds $2.03 in current assets. This means that the company is not facing any significant threat from its short term lenders. The acid test is basically a refined version of the current ratio, deducting inventories from the current assets of the firm, because of their illiquidity. The acid test for TCI in 1995 is 1.35. This is notably lower than the current ratio, which may indicate that TCI is holding too much inventory, but 1.35 is still a generally healthy acid test ratio. The profit margin and total asset turnover of TCI are 5.06% and 2.61, respectively. These numbers are used in the DuPont Equation to calculate Return on Equity, generally a good measure of a firm’s financial health. The ROE for TCI is 23.73%, which by most investors’ standards is a very strong return. The forecasted ROE for 1996 for TCI is 32.67%, an even stronger return. The overall health...
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...Paper When it comes to a Michelin tire, everyone knows that they are made with quality and the highest levels of innovation. The technology that is put into a Michelin tire is of great importance and Michelin takes great pride in the product that they make. There are multiple target markets that Michelin targets such as agriculture, racing, motocross, Indy, industrial equipment, bicycles, high performance and all season tires for our everyday automobiles. “All Michelin tires (both Replacement & Original Equipment) com with a limited warranty for tread wear, as well as a limited warranty which covers defects in workmanship and materials for the life of the original usable tread, or for 6 years from date of purchase, whichever occurs first. Mileage tread wear warranties vary by tire line” (Michelin US, 2015). The target market for my product will be for the everyday driver that can provide all the safe and performance needs that a tire should give. My product will be one that will divide and conquer the road and easily separate itself from other contender’s. The tire market that my product will most be involved and end up on top of is the all season tires. The reason for the all season tire market is simply because this tire product is the ones that are most popular and are used more than any other tires in the world. My product has no boundaries when it comes to the high technology of road grip traction and longevity of tire mileage capabilities. When it comes...
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...EXERCISE I. What is a paragraph? Some of these groups of sentences are paragraphs and some are not. Read them carefully and answer the questions. 1- Iceland is not a place for the ordinary tourist. The landscape, for example, is bare and strange—though many consider it beautiful in its own way. Then, too, the far northern climate is not ideal for tourism. The winter weather is extremely severe and the summers are short and cool, with constant strong winds. The remote location also means that many products have to be imported and so they are expensive. However, the few tourists who do put up with these difficulties are warmly welcomed by the Icelanders. Is this a paragraph? _______ If it is a paragraph, what is it about? _____________________________________________ 2- For fewer tourists, lower prices, and more beautiful scenery, head for the Sagres Peninsula. The regional museum has a rich collection of costumes, weapons, and handicrafts. Buses will get you to most places, but for long trips, trains are cheaper and more comfortable. The Portuguese economy has expanded very rapidly in recent years, but it still has many problems. In the fifteenth century, Lisbon was a worldwide center of political power, religion, and culture. Is this a paragraph? ______ If it is a paragraph, what is it about? _________________________________________ 3. The two peoples of Belgium—the Flemish and the Walloons—are divided by language, culture, and economics. Hotels in Brussels are expensive...
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...Paradigm Shifts Today’s cars technology are on the rises. For so many years, cars have been part of ours everyday lives. We uses cars to get from one place to another within the city and out of towns. Apparently, cars could save us lot of times through traveling. Cars had been upgraded and improved ever since. Like nowadays, we now have a driverless car which still waiting for approval from the government. What will happen in the next 20 years from now, if our cars technology are improving much more than what we actually have? I thinks that if we continue with the technology that we have now, we'll be in greater advance in the next 20 years or so. The futures cars will be flying in the air like in the movies called (“Back To The Future” and “The Fifth Element”). Ours future cars most likely be able to flow in midair by having magnet on the bottom of the cars and the roads should be made of magnet with the opposite side of magnetism, which will forces and lifts up the car in midair by the magnet from the car and the road. The Car should have a fan in the back which will be powered by electricity battery system motor. While the motor is being turn on, it will generate the power and move the car forward or backward in midair (kind of like the hovercraft designed by Christopher Cockerell back in 1955). The only different is that the car will be in midair but not in water or land. The first impact is on rules and regulations of traffic. The cars are no longer using the roads...
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...The Wheel The wheel is one of humanity’s greatest technological innovations from ancient times. Although it has gone through many different design changes over the years, its original purpose has remained the same. The purpose would be that of transportation. Who would have thought that the use of wooden wheels as a means of transport by the Sumerians back around 3200 B.C., would lead to using rubber tires on cars to help us get around today? The wheel, as we know it today, has survived throughout the centuries and many civilizations to become one of those creations that many people now take for granted. The beginnings of the wheel took place in Mesopotamia. Mesopotamia was located between the Tigris and the Nile rivers. The Sumerians were the people who inhabited this fertile land around 3200 B.C. Back then they hauled things by hand or either on their backs and heads. Someone came up with the idea to put the heavy objects on logs to roll them along. Later they added a runner to this and then placed the logs underneath it. The heavy object was then placed on top of the runner, which made transporting it even easier. This became known as a sledge. The Sumerians began to notice that over time the roller started developing grooves in it. The grooves also allowed for a greater distance of transport before another log had to be placed under the sledge. The next thing they did was to cut away the wood in between the grooves to create what we now call an axle...
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...said. Actor Paul Walker dies Actor Paul Walker dies Witness: Walker was not drag racing View scene of Walker's deadly car crash Jim Torp, a car enthusiast who was at the charity event that Walker attended before the wreck, said he doubted drag racing was involved. Walker was smiling as he got into the Porsche minutes earlier. Torp thought he heard a blast in the distance before the car slammed into a light pole, he said. "What the first explosion was, I don't know if their tire blew up, because it sounded like a tire blew on the car," Torp told CNN Monday. Tire skid marks on the asphalt near the crash site, which indicate a car was doing doughnut spins, also are being looked at, Cohen said. It has not been concluded that they are related to the Walker wreck, he said. The street has a reputation for fast drivers, which spurred a crackdown by deputies two years ago, he said. Torp told CNN that he looked closely at the skid marks and concluded they were left by a car with smaller tires. Walker and Roger Rodas, who was believed to be driving, died in the wreck on Hercules Street, a wide business park road, in the community of Valencia inside...
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