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That is not the case with Tire City, as the company has only 19% of its capital structure in long-term debt and its debt/equity ratio is 0.39. Solvency is important because I need to know that in the short-term, the company can make its payments. Tire City has over $1 million in cash, has a strong current ratio and a low level of current maturities ($125,000).
Given that the current financial position is strong, the third thing I want to know is that the company is expected to maintain a strong financial position going forward. For this I note that sales are increasing, the net profit margin is stable, and the expansion of the business in terms of assets, retained earnings, sales and profits has been stable over the past five years, it appears...
Note that the covenants were met as of fiscal 1996, and are met easily in fiscal 1997. The company might be required to lower its inventory temporarily going forward, but cash was not included in the net working capital calculation and if we include it, then the covenant should easily met. Also encouraging is the evidence in the inventory and asset turnover ratios that Tire City is tightening its cash conversion ratio steadily, as this indicates not only improved efficiency but also that the company will have more cash available with which to make payments. I see little reason to believe that Tire City would have any difficulty at all making repayments, and I…
Decision
As a lender, I would lend money to Tire City. There are three things I am looking for as a lender in this situation. The first is liquidity, the second is solvency and the third is growth. Liquidity is important because I would not want to lend to a company that was already highly leveraged. That is not the case with Tire City, as the company has only 19% of its capital structure in long-term debt and its debt/equity ratio is 0.39. Solvency is important because I need to know that in the short-term, the company can make its payments. Tire City has over $1 million in cash, has a strong current ratio and a low level of current maturities ($125,000).
Given that the current financial position is strong, the third thing I want to know is that the company is expected to maintain a strong financial position going forward. For this I note that sales are increasing, the net profit margin is stable, and the expansion of the business in terms of assets, retained earnings, sales and profits has been stable over the past five years, it appears that the company is positioned to continue with this growth over the coming years as well. Note that the covenants were met as of fiscal 1996, and are met easily in fiscal 1997. The company might be required to lower its inventory temporarily going forward, but cash was not included in the net working capital calculation and if we include it, then the covenant should easily met. Also encouraging is the evidence in the inventory and asset turnover ratios that Tire City is tightening its cash conversion ratio steadily, as this indicates not only improved efficiency but also that the company will have more cash available with which to make payments. I see little reason to believe that Tire City would have any difficulty at all making repayments, and I see a lot of reasons why lending them money would be a good investment.
Tire Industry Tire manufacturing This is an industry analysis of the tire manufacturing industry. It has sources. The Industry's dominant economic features Porters Five Forces -- the rivalry amoung competiting sellers in the industry the potential entry of new competitors -Wining customers over their own substitute products Supplier-seller collaboration and bargaining -Seller-buyer collaboration and bargaining Drivers of change in the industry Companies in the Strongest/Weakest Positions Key Success Factors for Competitive Success The tire manufacturing industry is one of the most diversified and
The United Steelworkers struck over the proposed closing, and the strike dragged on for several weeks before being settled, causing problems throughout the company and their customers, as well. The strike began Oct. 5, and over 12,000 workers were involved in the strike. The strike was anticipated, so many retailers were able to stockpile Goodyear tires in an attempt to alleviate the affects of the strike, but smaller retailers,
NYC African Restaurants African Restaurants African Restaurants in NYC The restaurant's soft industrial lighting makes the chrome gleam. A soft and expansive backdrop of blue gives the space a cool and slightly futuristic industrial like a hip loft in the future. Exposed brick walls are tinged in a blue sheen and the distressed wood chairs and tables have been stained steel gray and have marble table tops. In three weeks, Cisse Elhadji, the
Schalch, 2008). III. The big city and the suburbs have very different environments each with its own pros and cons depending on your preferences. a. Crowd i. The fast paced city life is a maze of interesting personalities. It opens you up to different points-of-view, thus expanding your learning horizon. However, just like in a real maze, it is easy to get so lost inside it that you can't figure out who
Relocating and Existing Business Business Relocation Literature Review: Ronnie's Place Convenience Store Four Oaks, NC One of the most integral parts of successful business transitions of any kind is associated with proper and seemingly exhaustive research. A literature review of the particular issues associated with any business trend or transition can serve any business owner no matter how small their scope. Though it is important to understand the local and regional aspects
New Product in the Market New Good or Service Business Proposal Tire Company Plan to Increase Range of Products Our company deals in sale of small car tires to individuals and companies in Minnesota. The region has grown from dependence on production of raw material for sale in other region to production and manufacturing activities. In the region, there is a significant increase in truck haulage business owing to the growth seen