Escolar Documentos
Profissional Documentos
Cultura Documentos
't
ments
etO'*U""'1"'iit *ttti"g'
1)
fo;Tire CitY
(see
CompanY Background
Tire City,
Inc (TCl)
Exhibit
of automotive tires in
was a rapidly growing retail distributor
th'o"gh a chain of l0 shops located
Connecttsouthem New Hampshire' and northern
could b-e
Wo'""*"', f'Au"""ft"'"ttslndividual stores. stores within 24 hours.
rtii oto"tt from individlal
*hi"h
Ner
"o"l;;;;;ily
rqq5' rcr had sales or s2l'505'000
i""';;;;;;;
F""h';#:;ii
ro,'itut
'
p"ioi
*ui-S
ou'Iq t:
'ib0'00o
income
of cus-
1ee 1,
rcr
had
b':'"*:1,T*,:":-ylitil!,;"ol.,ll.flJffit"ffi ;HllT":::
Iine
i'l es abr shedthisacredit
::'iil1i11*':::'#;.t#'';i:T'il"ioi
arangement
under
monev
anv
u"tt"*ed
oI irerir at vid-
Et".k.
Th;*:;;;;rt"i't"i
v"t
W carl
""rr'*itl"il.
pt"j""i
"tp""t"a
rather than
basis for class discussion
Kester prepared thls case as the
or
"iJl"ri?J"" reel'""oective
bv the Pre'idenr
*,t'l'"-.':;:l;*::i:t"",i:,:'3:::::;i,"r'"liX',Ti,l. Js"d
"r.
copy,iehr@
(drr
ncrmission to leproduce mareflars,
'Boston,
l.:;;;_";;
to illustrate
o'n"*;'"-
ioui
,;,."uced,
u.y ''."on.
'17
"18 Intt'oductory
EXHIBIT
Etercises
Financial Stetements
for Tire City, Inc.
INCOME 5TATEMENT
Net sales
Cost of sales
Cross profit
Sellinq, qeneral, .rnd ad'nini't'dlive expense5
Depreciation
Net interest exPense
Pre-tax income
lncome taxes
Net income
BALANCE SHEET
Assets
199
$16,230
$20,35s
$23,505
9,430
',l,898
--6;Eab
8,457
5,19 s
.6,352
1
2,115
925
997
155
200
508
2,545
1,630
4,683
1,1r0
$240
706
3,652
2,190
6,548
4,163
1,728
3,79 5
1,51 5
,897
2,2A0
$ 6,580
$ 7 ,822
$ 8,983
$ 12s
1,440
- 1,6s3
609
3,095
3,232
1,335
LIABILITIES
94
822
780
,471
,819
546
Tol al d5\els
213
$
$
Accounts receivable
lnventories
Total current assets
13,612
9,893
180
106
160
1"t6
Cash
1994
119
Dividends
1993
125
125
2,312
,32s
1 ,432
2,882
Long-term debt
1,000
875
Common stock
1,135
i ,'1 35
2,930
3,!q0
7,822
$ 8,983
Retained earnings
Total shareholders' equltY
lotal
,O42
1,1,45
1::
$ 6,580
lrabrlrtleS
3,218
750
I,I
35
recin 1996. However, Mr' Martin was told by his accountant that in 1997' TCI could
of
value
dollar
The
ogrri^ u o"p*.*iion expense of 5% of tire warehouse's total cost
as
be
the
same
on its other assets in 1996 and 1997 would
TtI's depr".iutiolt
"*p"nr.
it was in 1995.
The warehouse expansion project was designed so that disruption of the company's
current operations r,vould be minimized. However, management expected that by-.the
levd{ of
end of 1996. TCI wor.rld temporarily have to decrease its inventories to a
at the
sheet
$1.625,000, significantly lower than ihe $2,190,000 shown on the balance
warehouse
until the
end of 1995. This cutback in inventories was expected to last only
project was completecl in early i997. Mr' Martin had estimated that' by
to
"onroo.tion
il.r" .na of 1997, in'r"ntoty would rise back to the same proportional relationship
sales that it had
in
1995
|,,
v
b
Tire CitY
Inc l9
and. 1991