Tire City

1.

Cash Flow- Tire City, Inc. | | | |

| | | 1994 | 1995 |

Net Income | | | $997,000 | $1,190,000 |

Depreciation | | | $180,000 | $213,000 |

| | | | |

Increase Inventory | | ($208,000) | ($352,000) |

Increase Accounts Receivable | | ($550,000) | ($557,000) |

Increase Accounts Payable | | $283,000 | $115,000 |

Increase in Accruals | | $287,000 | $221,000 |

Increase in Income Taxes Payable | ($276) | ($103) |

Cash for Operations | | $989,000 | $830,000 |

| | | | |

Purchase of Plant and Equipment | ($563,000) | ($368,000) |

Cash Provided by Investments | ($563,000) | ($368,000) |

| | | | |

Decrease in Long Term Debt | | ($125,000) | ($125,000) |

Payment of Dividends | | ($200,000) | ($240,000) |

Cash Provided by Financing | ($325,000) | ($365,000) |

| | | | |

Net Cash Increase | | $101,000 | $97,000 |

Beginning Cash Balance | | $508,000 | $609,000 |

| | | | |

Cash at End of Year | | $609,000 | $706,000 |

2. Ratio Analysis

| 1994 | 1995 |

Liquidity | | |

Current Ratio | $5,542 / $2,882 = 1.92 | $6,548 / $3,218 = 2.03 |

Quick Ratio | $3,704 / $2,882 = 1.29 | $4,358 / $3,218 = 1.35 |

Profitability | | |

Gross Margin | $8,457 / $20,355 = 0.415 = 41.5% | $9,893/$23,505 = 0.42 =42% |

Net Profit Margin | $997 / $20,355 = 0.048 = 4.8% | $1,190 / $23,505 = 0.05 = 5% |

Activity | | |

Inventory Turnover | $11,898/ $1,838 = 6.47 | $13,612 / $2,190 = 6.22 |

Accounts Receivable Collection Period | $20,355 / 365 = 55.77$3,095 / 55.77 = 55 days | $23,505 / 365 = 64.4$3,652/ 64.4 = 57 days |

Leverage | | |

Debt to Equity Ratio | $875 / $4,065 = 0.22 | $750 / $5,015 = 0.15 |

Return on Equity | $997 / $4,065 = 0.25= 25% | $1,190 / $5,015= 0.24= 24% |

Return on Assets | $997 / $7,822 = 0.13 = 13% | $1,190 / $8,983= 0.13 = 13% |

3. Upon analysis, Tire City, Inc. appears to be a financially secure company with...