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Part 2 – Capacity
Read the Caskey Trucking Financials and the Caskey Trucking Case to identify the
strengths and weaknesses of the company’s capacity.

Strengths
• Historic revenues are relatively
stable between $240,000 and
$285,000.
Sales
• The asset turnover ratio has
trended upward in the past
because the truck book value
keeps falling as the truck is
depreciated.
Assets
• Operating and net profit margins
are relatively stable between
25% and 35%, but these profit
Profits
figures exclude Bill’s salary which
is taken in the form of a
dividend.
• In the last two years, the debt
service coverage ratio is a
Debt
healthy 2.20 or higher.
• Although Caskey Trucking has some strengths, the financing of two new
Overall trucks will put a strain on Caskey Trucking’s capacity.
Conclusion
Weaknesses
• Most historic revenues come
from Bill Caskey’s parents.
• Forecast revenues are $485,000
but Bill has no track record in
finding clients to support this
size of revenue growth.
• Caskey Trucking only has one 8-
year-old truck.
• Accounts receivable turnover
has deteriorated although it is
forecasted to improve
dramatically.
• The working capital ratio is
consistently below 1 which
suggests potential liquidity
issues.
• Once dividends are taken into
account, profits are very small.
• With the new debt, the debt
service coverage ratio drops to a
low of 1.04. Typically, this ratio
should never go below 1.25.