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* Andre Pires opened automobile store (Quickfix Auto Parts) 5 years ago * Worked as a technician, parts department manager for over 15 years * Doubled his store size by the third year * Worried about past two years (net income had been negative and cash flow decreased) * Wanted to improve this situation before suppliers found out * Hired a student from the finance department of university´s business school to find arguments for the bank to get loan in the future

1. How does Quickfix´s average compound growth rate in sales compare with ist earnings growth rate over the past five years?

Compound growth rate in sales:

Net salest+1-Net sales(t)Net sales(t) =annual growth rate in sales

2001 to 2002: = 0.0917 2002 to 2003: =0.191 2003 to 2004: =0.12 2004 to 2005: =0.16

9.17+19.1+12+164 = 0.141 average annual growth rate in sales

The average annual growth rate is 14.1%

earnings growth rate:

Net incomet+1-Net income(t)Net income(t)

2001 to 2002: =0.374 2002 to 2003: =-0.907 2003 to 2004: =-8.73 2004 to 2005: = 0.994

Net income decreased from 16634$ to -102$ 2.Which statements should Juan refer to and which ones should he construct so as to develop a fair assessment oft he firm´s financial condition?Explain why?

* Balance sheet picture of a company * refer to balance sheet and income statement shows revenue the company earned * shows financial strenght * make comparisons with similar firms * cash flow statement where cash comes from, where spent

3. What calculations should Juan do in ordert o get a good grasp of what is going on with Quickfix´s performance?

* Coverage ratios * Profitability * Liquidity * Leverage * DuPoint Analysis * shows what affected the profitability of the company

4. Juan knows that he should

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