Ratio Analysis Project

Ratio Analysis Project

By Jeffrey Zaidel

Tim Horton’s Inc. and Subsidiaries

(All corresponding values are represented in thousands of Canadian Dollars)

Debt Ratio

Total Liabilities /Total Assets

For year 2012 =$1,094,088/$2,284,179

=0.49 or 49%

For year 2013 =$ 1,672,304/$2,423,833

=0.69 or 69%

Industry Standards (USA) =37.7%

The debt ratio shows that in 2013 Tim Horton’s financed 69% of its Assets through debt financing. This is a large increase from the year before (2012) which was only 49%. These numbers are both below 1 (0.69 and 0.49) which is generally acceptable, however, the industry standard is lower at 37.7% or 0.317. From this we can see that Tim Horton’s is financing more of its assets than competitors.

Return on Equity

Net Profit / Total Equity

For year 2012 =$407,766/$1,190,091

=0.34 or 34%

For year 2013 =$428,649/$761,519

=0.56 or 56%

Industry Standards (USA) =24.59%

The return on equity ratio increased from 2012 at 34% to 56% in 2013, which means that Tim Horton’s has increased their profit on every $1.00 of equity invested by the owners from 34¢ to 56¢. The industry standard is 24.59% or 24.59¢ per $1.00 invested. From this we see that Tim Horton’s earns more for each dollar invested than its competitors.

Vertical Analysis

TIM HORTONS INC. AND SUBSIDUARIES CONSOLIDATED STATEMENT OF OPERATIONS FOR YEARS ENDING 2012-2013 (in thousands of Canadian Dollars) |

| 2013 | % | 2012 | % |

Revenues | $3,255,533 | 100% | $3,120,504 | 100% |

Sales | $2,265,884 | 69.6% | $2,225,659 | 71.3% |

Other Revenues | $989,649 | 30.3% | $894,845 | 28.7% |

Cost of Sales | $1,972,903 | 60.6% | $1,957,338 | 62.7% |

Total Costs and Expenses | $2,634,438 | 80.9% | $2,525,979 | 80.9% |

Operating Expenses | $321,836 | 9.9% | $284,321 | 9.1% |

Franchise Fee Costs | $162,605 | 5% | $116,644 | 3.7% |

General and Administrative Expenses | $159,523 | 4.9% | $163,885 | 5.2% |

Other Expenses | $17,571 | 0.53% |...