Tire City Case

2031 WordsDec 30, 20119 Pages
Backg Introduction Tire City, Inc is a growing distributor of tires in the Northeastern part of the United States. Tire City, Inc is positioned in eastern Massachusetts, southern New Hampshire and northern Connecticut. Tire City, Inc distributes its product through a chain of 10 stores and a central warehouse outside Worcester, Massachusetts. In the past three years, Tire City has grown at an annual compound rate of 20% which was attributed to its excellent reputation for service and competitive pricing. Due to its growth, Tire City is currently at maximum capacity in its warehouse and is considering expanding its current warehouse facility to accommodate service levels. Jack Martin and Abeer Mandil are in the process of…show more content…
The reason is the expansion in the warehouse ($2,400,000) which increased fixed assets and the AFN needed. Tire City’s cash ratio increased in 1997 from 0 .22 in 1995 to 0.92 as cash was increasing in 3% of sales. Working capital ratio increased slightly in 1997. Tire City Inc has reasonable cash flow in 1997. Leverage |Leverage Ratios |1995 |1997 | |Debt ratio |44.17% |45.10% | |TIE coverage |23.50 |28.25 | |L.T Debt ratio |0.13 |0.06 | |Debt/Equity ratio |0.79 |0.82 | |Equity multiplier |1.79 |1.82 | Tire City Inc has increased its debt ratio from 44.17% in 1995 to 44.10% in 1997 by planning to take the bank loan for the additional fund needed. Also, Tire City time interest earned coverage increased from 23.50 in 1995 to 28.25 in 1997. L.T Debt decreased slightly in 1997 than 1995 due to the decrease in the long term debt from $750,000 in 1995 to $500,000 in 1997. Debut to equity ratio has increased slightly from 0.79 in 1995 to 0.82 in 1997. Asset Management |Asset Mgmt Ratios |1995 |1997 | |Inventory Turnover |6.22

More about Tire City Case

Open Document