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Tire City Inc. Case Study

In: Business and Management

Submitted By FMichael
Words 1288
Pages 6
RATIO | 1993 | 1994 | 1995 | Profitability | Gr. Profit Margin | 41.90% | 41.55% | 42.09% | Pretax Margin | 8.17% | 8.94% | 9.00% | Net Margin | 4.81% | 4.90% | 5.06% | Ret. On Assets | 11.85% | 12,75% | 13.25% | Ret. On Capital | 18.28% | 20.18% | 20.64% | Ret. On Equity | 23.87% | 24.53% | 23.72% | Activity ratio | Total asset turnover | 2.47x | 2.60x | 2.62x | Inventory turnover | 9.96x | 11.07x | 10.73x | Receivable turnover | 6.38x | 6.58x | 6.44x | Days Receivable | 57.24 | 55.50 | 56.71 | Days Inventory | 63.09 | 56.39 | 58.72 | Days Payable | | 39.95 | 37.64 | Purchases | | 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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