Tire City Incorporated
Tire City, Inc. is a rapidly growing retail distributor of automotive tires. Although they have 10 shops located throughout the Northeast region, the bulk of TCI’s inventory is managed at a central warehouse. During the last three years, sales have been growing at a compound annual rate in excess of 20%. With such a great reflection of their excellent service and customer satisfaction in their net income, TCI’s central warehouse is “bulging at the seams”. TCI has decided to expand its warehouse facilities to accommodate future growth, and has requested a five year loan. We, MidBank, previously financed a project for TCI in 1991, which is currently being repaid in equal annual installments. TCI plans to
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Profitability Ratios:
The Gross Margin ratio represents the percent of total sales revenue that TCI retains after incurring the direct costs associated with producing the goods and services sold by them. It helps us distinguish, as much as possible, between fixed and variable costs. With a 20%, 15%, or 10% projected increase in sales, for 1996, we calculated TCI’s GM ratio to be 41.85% , and in 1997 to be 41.84%. This means that around 42% of TCI’s sales dollar is available to pay for fixed costs, like its potential long-term debt to MidBank, and to add to profits.
The Return on Assets ratio is a basic measure of the efficiency with which TCI allocates and manages its resources (assets) to generate earnings. With a 20% projected increase in sales, for 1996, we calculated TCI’s ROA to be 12.95%, and 12.11% for 1997. Although this isn’t an extremely high ROA, TCI will be allocating its resources very wisely with the expansion of its central warehouse. If MidBank lends them the cash they need to complete this project, their central warehouse will be able to hold more tires for their increasing sales, which will then convert into profit. A true test of TCI’s ROA will be after 1998, when the warehouse is complete, so you can see just how well they can convert an investment into profit.
The Return on Equity ratio is a measure of the efficiency with which a company employs owners’ capital. It
Gross margins for 1994, 1995, 1996 and 1997 were 53.9%, 49%, 52.63% and 55.5%, respectively. Be Our Guest, Inc. is doing a solid job of keeping the Costs of Revenue in line with the Sales Revenue. It is a positive sign to see this growth, because we can be assured that the company is staying competitive, while not completely giving in to the pricing crunch. Annual Sales Revenue has a strong CAGR, but it is important and concerning to note that the CAGR of total Operating Expenses is higher. It is about 5% higher and this is very important, because Be Our Guest needs to stay in control of its expenses.
Similar to return on equity, return on assets can be used to measure profitability between two companies. It measures the total investment made by a company with respect to net income. Net sales for both companies declined as described in the return on equity section. At the same time, both Staples and AEO continued to
Return on assets is an efficiency ratio. It compares the profits generated with the asset base required. It answers the question, how hard
A typical Gross profit margin depending on the industry may be 25 to 30%. Nucor’s Gross profit margin ratio indicates that industry is intense and cost of goods is one of the main of factor in profitability. After examining the five year
* Return on assets (ROA) – ROA shows how successful a company is in generating profits on the amount of assets they own. Since assets consist of debt and equity, ROA is a measure of how well a company converts investment dollars into profit. The higher the percentage, the more profit a company is generating per dollar of investment. Similar to ROS, this ratio needs to be looked at compared to the industry as different industries have different requirements that can affect ROA. For example, companies in the airline and mining industries need expensive assets to operate so will have lower ROA’s compared to companies in the pharmaceutical or advertising industries.
First of all, return on asset (ROA) is a ratio used to measure how efficient a company generates profit using its assets, which is the invested capital. We noticed that HH’s ROA was increasing from 2006 to 2010. However, HH’s ROA for 2011 dropped dramatically from 18.41%(year
I. Rate of Return on Total Assets: Measures the company’s profitability relative to total assets. A percentage increment for Company G, from 12.30% to 13.68% (2011-12) keeps them above industry benchmarks (8.60% and 12.30%). Rate of Return on Total Assets represents strength for Company G.
Tire City, Inc. has petitioned MidBank for a loan in order to expand their business, and build a new warehouse. Through the financial statement reporting and the numbers that have been presented to me, I believe that this is a sound investment. The growth percentage of 20 percent per year is conceivable, if business stays as it currently is. The amount of debt that would need to be financed for this expansion is palatable, and well within the normal ranges for these sort of projects. Moreover, the company has very solid net working capital and leverage ratios. All of these factors lead me to believe that this will be a profitable investment for the bank. The one issue that I had was in 1996 when Tire City capped their
ROA is considered the best overall indicator of the efficiency of assets used in a company. Home Depot and Lowe’s ROA ratio both moved down due to the downturn in the industry but Home Depot was able to improve 2010.
The return on equity ratio measures how well a company is using its owner 's investments to generate after tax profits. Investors like to see a high return on equity since it indicates the company is using the owner 's investments efficiently to generate after tax profits, (Schermehorn, J, et al, 2004). Different industries requires different percentage of return on equity as some industries need to generate high return on the basis that less capital is invested, (Palepu et al. 2010). Return on equity has increased from 3.39% in 2011 to 5.46% in 2012 this is consistent with the growth strategy and cost efficiency strategy. However the strategic cost played a significant part in the lower net income of 2011 for example even though the total equity increased by 4.70% it is not as large as the 68.44% increase in the profit after tax. Return on equity has three parts; operation efficiency, assets used efficiency and equity multiplier.
A high return on equity compensates investors for the use of their capital and for the riskiness that is involved with their investment. Clark Carriers 52.6% return on equity shows that management is effective in handling the company's business resources and this is good in the eyes of lenders when loans are being considered.
Stock: Netflix(NFLX) - Group 5 - Tuesday, October 13th, 2015: NFLX priced at $109.51 1. Netflix Ratios: 1. Return on Assets = Net Income / Total Assets = 3.78% The ROA describes how efficient a company is at using its assets to generate earnings.
● Service accounts for 1/8th of total revenue and provides a gross margin of 23-25%
1. Discuss how a ROWE-type program would fit in organizations where you have worked or an establishment that you are aware of. Explain why it would or would not work.
“Evidence of Human Resource Management can be traced to pre-historic times, like mechanisms being developed for selecting tribal leaders. Knowledge was recorded and passed on to the next generation about safety, health, hunting, and gathering. 1000 B.C to 2000 B.C saw the development of more advanced HR functions. The Chinese are known to be the first to use employee screening techniques, way back in 1115 B.C. And turns out it was not Donald Trump who started "the apprentice" system. They were the Greek and Babylonian civilizations, ages before the medieval times.” - Rashida Khilawala