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Tire City Case Study
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Transcript
Would We Invest?
New Financial Health
- YES!
- Strong Financially
- Capital Structure
- Debt-Servicing Capacities
- Ratios relatively consistent
- Apprehensive about assumption of growth, steady operation margins during transition
- Weaker now, but set up for future
- Return on Equity
- 23.43% in 1996 // 22.64% in 1997
- 23.73% in 1995
- Return on Assets
- 13.07% in 1996 // 12.55% in 1997
- 13.25% in 1995
- Small liquidity decrease
- Debt / Capital Ratio (higher debt now)
- .14 in 1996 // .17 in 1997
- .13 in 1995
Questions
At this time we would like to answer any questions the class may have.
Proforma
Company Backgorund
Proforma
- Rapidly Growing Distributor of Tires in N.E.
- 20% Compound Annual Sales Growth
- 10 Shops in MA, NH and CT
- Central Warehouse in Worcester, MA
- 24-Hour Turnaround - Warehouse to Store
- Core Competencies and Values
- Excellent Service
- Competitive Prices
- High Customer Satisfaction
Case Study Background
- Jack Martin, CFO
- Meeting with MidBank in 1 week
- Have borrowed previously (1991)
- $875,000 balance
- Needs to secure 5 year loan
- Warehouse expansion
- Preliminary discusions
- 10% interest
- 2 borrow periods ('96, '97)
- 4 annual periods ('98 start)
1993-1995 Financials
1993-1995 Financial Health
- Sales: $16,230 to $23,505 '93-'95
- 44.8% increase
- Net Income: $780 to $1,190
- 52.6% increase
- Cost of sales increased .5% lower than sales increase
- 3% Cash Balance
- Consistent ratios
- Quick and Current are healthy - finance
- 2.6 asset turnover - inv. mgmt.
- 58.72 inventory days
Tire City Case Study
Matthew Lane - Miray Bou Nassif - SangSang He
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