Tire City Case Solution

Balance Sheet Assets Cash Accounts Recievables Inventories Total Current Assets Gross Plant&Equipment Less:Accumul Dep Net Plant&Equipment Total Assets Liabilities Current Maturities of L.T.D Accounts Payables Accrued Expenses Total Current Liabilities Long Term Debt Ne Bank(B/f) Common Stock Retained Earnings Toatal Shareholders Equity Total Liabilities

Income Statement Net Sales less:Cost Of Sales Gross Profit Selling,general,admin Exp Depreciation EBIT Net Intt Expense PBT Less: Income Tax Net Income Less: Dividends RE Ratio Analysis Liquidity Ratios/Short-term Ratos Current Ratio C.A/C.L Quick Ratio C.A-Inventory/C.L

1993 1994 1995 1996 Amt($) Amt($) Amt($) Amt($) 508 609 706 846 2545 3095 3652 4372 1630 1838 2190 1625 4683 5542 6548 6843 3232 3795 4163 6163 1335 1515 1728 1941 1897 2280 2435 4222 6580

7822

8983

11065

Amt($)

Amt($) Amt($) Amt($) 125 125 125 1325 1440 1777 1432 1653 1974 2882 3218 3876 875 750 625 Err:522 1135 1135 1135 1135 2133 2930 3880 Err:522 3268 4065 5015 Err:522 125 1042 1145 2312 1000

6580

7822

8983

11065

1993 1994 1995 1996 Amt($) Amt($) Amt($) Amt($) 16230 20355 23505 28206 9430 11898 13612 16416 6800 8457 9893 11790 5195 6352 7471 8941 160 180 213 213 1445 1925 2209 2636 119 106 94 Err:522 1326 1819 2115 Err:522 546 822 925 Err:522 780 997 1190 Err:522 155 200 240 Err:522 625 797 950 Err:522

1993 2.0 1.3

1994 1.9 1.3

1995 2.0 1.4

1996 1.8 1.3

Cash Ratio Cash/C.L 0.22 Debt Service Coverage PBIT/(Intt+(Cuurent Matut/(1-t))) 4.3 Long-term Solvency Toatal Debt Ratio T.A-T.E/T.A 0.50 Debt-Equity Ratio T.Debt/T.Equity 0.31 Eqity Multipler T.A/T.E 2.0 Time Intt Earned Rat EBIT/Intt 12.1 Turnover Ratios Inventory Turnover COGS/Inventory Days Sales in Inventry 365/Inventory Ratio Recievables TurnoverSales/Debtors(Reciev) Days sales in Recievab 365/Reciveable Turnover Payables Turnover Purchases/Creditors Days purchase in Payabl 365/Payables Turnover Total Asset Turnover Sales/Total Assets Profitability Ratios Profit Margin Net income/sales Gross Profit Margin Gross profit/sales Return On Assets (PBIT*(1-T))/T.A Return On Equity Net income/T.E

Purchases

cogs-O.S+C.S

0.21 5.9

0.22 7.0

0.22 7.8

0.48 0.22 1.9 18.2

0.44 0.15 1.8 23.5

0.44 0.17 1.8 22.8

5.8 63 6.4 57 10.6 34 2.47

6.5 56 6.6 55 9.1 40 2.60

6.2 59 6.4 57 9.7 38 2.62

10.1 36 6.5 57 8.9 41 2.55

0.05 0.42 0.124 0.239

0.05 0.42 0.139 0.245

0.05 0.42 0.139 0.237

0.05 0.42 0.135 0.232

11060

12106

13964

15851

1997 Amt($) 1015 5246 3148 9409 6563 2274 4289

What if accrued exp don’t rise This Mean I m paying back,cash is reduced n more

13698 Amt($) 125 2132 2369 4627 500 Err:522 1135 Err:522 Err:522 13698

1997 Amt($) 33847 19699 14148 10729 333 3086 Err:522 Err:522 Err:522 Err:522 Err:522 Err:522

1997 2.0 1.4

Assumptions Sales Growth COGS Selling and Dist Dep Tax Dividends Cash A/c Recievables Inventory Plant&equip Accumulated Dep Accounts Payable Accrued Expenses Investment Warehouse New Dep RATE on Invst Interest Rate Inventory

20% 58.20% 31.70% as given 43.40% 20% 3% 15.50% as given as given as given 6.30% 7% 2400 5% 10% 9.30% Fund Requirement(Accrued Exp) Err:522 Err:522 5% 998.51 1833.62 6% 703.07 1465.09 7% 407.64 1096.56 8% 112.2 728.02 9% -183.24 359.49 10% -478.68 -9.05

Fund Requirement(Inventory)

0.22 7.9

Err:522 -73.37 281.15 635.68 990.2 1344.72 1699.24

0.45 0.21 1.8 17.9

6% 7% 8% 9% 10% 11%

6.3 58 6.5 57 10.0 37 2.47

Fund Requirement(Depreciation) Err:522 6% 1082.8 7% 1069.04 8% 1055.29 9% 1041.53 10% 1027.78 11% 1014.02

0.05 0.42 0.127 0.221

Fund Requirement(Recievables) Err:522 Err:522 16% 555.36 1280.82 17% 850.79 1649.36 18% 1146.23 2017.89 19% 1441.67 2386.43 20% 1737.11 2754.96 21% 2032.54 3123.5

21222 Fund Requirement(Payables) Err:522 Err:522 5.30% 703.07 1465.09 4.30% 998.51 1833.63 3.30% 1293.95 2202.16 2.30% 1589.39 2570.69 1.30% 1884.82 2939.23 0.30% 2180.26 3307.76

h is reduced n more debt required

More Than 15.5%

Lower Than 6.30%