RATIO | 1993 | 1994 | 1995 | Profitability | Gr. Profit Margin | 41.90% | 41.55% | 42.09% | Pretax Margin | 8.17% | 8.94% | 9.00% | Net Margin | 4.81% | 4.90% | 5.06% | Ret. On Assets | 11.85% | 12,75% | 13.25% | Ret. On Capital | 18.28% | 20.18% | 20.64% | Ret. On Equity | 23.87% | 24.53% | 23.72% | Activity ratio | Total asset turnover | 2.47x | 2.60x | 2.62x | Inventory turnover | 9.96x | 11.07x | 10.73x | Receivable turnover | 6.38x | 6.58x | 6.44x | Days Receivable | 57.24 | 55.50 | 56.71 | Days Inventory | 63.09 | 56.39 | 58.72 | Days Payable | | 39.95 | 37.64 | Purchases | | 12,106 | 13,964 | Liquidity | Current Ratio | 2.03x | 1.92x | 2.03x | Quick Ratio | 1.32x | 1.29x | 1.35x | Leverage |
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As an assumption sale is calculated based on 20% of growth over the next 2 years. This is because Tire City was able to be meeting customers’ demands by providing quick logistic as well as competitive pricing. As a result of this, it predicted that Tire City’s sales would be rising. Also, look back on this ages in 1990s, market demands for cars were tremendous. In addition to this, JPY was getting stronger against USD during from 1989 to 1995 that leads to bigger demands for domestic car products. Since Tire City is American company, they could get an advantage position rather than Japanese companies like Toyota and Honda. In terms of Cost of Sale, SG&AE, Income Taxes, Net Income and Dividends, the historical average was used to forecast. For Depreciation, 120 increased based on an assumption.
BALANCE SHEET | 1996 | 1997 | ASSUMPTIONS | ASSETS | | | | Cash Balances | 846 | 1,015 | 3% of Sales | Accounts Receivables | 4,372 |