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Homework Assignment 1: Tire City Pro Forma for 1997

Homework Assignment 1: Tire City Pro Forma for 1997


Due: Tuesday, January 18, 2005

Assignment:
First, complete the pro forma forecast for Tire City for 1997. In other w
in all the yellow shaded cells on the worksheet tabbed Pro Forma. For all for
items (anything that is not listed as an assumption) you must use a formula, not
number.
Second, calculate Tire Citys key performance ratios for 1997. That is,
the yellow shaded cells on the worksheet tabbed Performance Ratios. For all
ratios, you must use a formula, not a number.
Third, print out your work. Print the two worksheets with the numerica
on them, and then print the two worksheets in formula reveal (or audit) mode
reveal the formulas, press control accent (the accent key is the one above the ta
the left of the keyboard). You must print out both numerical results and formul
full credit.
Have fun and good luck.

Homework Assignment 1: Tire City Pro Forma for 1997

Tire City Pro Forma for 1997

rma forecast for Tire City for 1997. In other words, fill
the worksheet tabbed Pro Forma. For all forecast
as an assumption) you must use a formula, not a

tys key performance ratios for 1997. That is, fill in all
orksheet tabbed Performance Ratios. For all these
ot a number.
k. Print the two worksheets with the numerical results
worksheets in formula reveal (or audit) mode. To
l accent (the accent key is the one above the tab key on
ust print out both numerical results and formulas to get

Exhibit 1

Financial Statements for Tire City, Inc.

For years ending 12/31

1993

INCOME STATEMENT
Net sales
$ 16,230
Cost of sales
$ 9,430
Gross Profit
$ 6,800
Selling, general, and administrative expenses
$ 5,195
Depreciation
$
160
Net interest expense
$
119
Pre-tax income
$ 1,326
Income taxes
$
546
Net income
$
780
Dividends
$
155
BALANCE SHEET
Assets
Cash balances
Accounts receivable
Inventories
Total current assets
Gross plant & equipment
Accumulated depreciation
Net plant & equipment
Total assets
Liabilities and equity
Current maturities
Accounts payable
Accrued expenses
Total current liabilities
Long-term debt
Common stock
Retained earnings
Total shareholders' equity
Total liabilities and equity

1994

1995

$ 20,355
$ 11,898
$ 8,457
$ 6,352
$
180
$
106
$ 1,819
$
822
$
997
$
200

$ 23,505
$ 13,612
$ 9,893
$ 7,471
$
213
$
94
$ 2,115
$
925
$ 1,190
$
240

$
$
$
$
$
$
$
$

508
2,545
1,630
4,683
3,232
1,335
1,897
6,580

$
$
$
$
$
$
$
$

609
3,095
1,838
5,542
3,795
1,515
2,280
7,822

$
$
$
$
$
$
$
$

706
3,652
2,190
6,548
4,163
1,728
2,435
8,983

$
$
$
$
$
$
$
$
$

125
1,042
1,145
2,312
1,000
1,135
2,133
3,268
6,580

$
$
$
$
$
$
$
$
$

125
1,325
1,432
2,882
875
1,135
2,930
4,065
7,822

$
$
$
$
$
$
$
$
$

125
1,440
1,653
3,218
750
1,135
3,880
5,015
8,983

Tire City: Historical Ratios


1993
Cost of sales/Sales
SG&A/Sales

1994

1995

Average

58.10% 58.45% 57.91%


32.01% 31.21% 31.78%

58.2%
31.7%

Income tax/Pretax income 41.18% 45.19% 43.74%


Dividends/Net income
19.87% 20.06% 20.17%

43.4%
20.0%

Cash/Sales
Receivables/Sales
Inventories/Sales

3.0%
15.5%
9.5%

Payables/Sales
Accrued exp/Sales

3.13%
2.99%
3.00%
15.68% 15.21% 15.54%
10.04%
9.03%
9.32%
6.42%
7.05%

6.51%
7.04%

6.13%
7.03%

6.4%
7.0%

Historical and Pro Forma Financial Statements for Tire City, Inc.

For years ending 12/31


INCOME STATEMENT
Net sales
Cost of sales
Gross Profit
Selling, general, and administrative expenses
Depreciation
Net interest expense
Pre-tax income
Income taxes
Net income
Dividends
BALANCE SHEET
Assets
Cash balances
Accounts receivable
Inventories
Total current assets
Gross plant & equipment
Accumulated depreciation
Net plant & equipment
Total assets
Liabilities
Current maturities
Bank Debt (Plug)
Accounts payable
Accrued expenses
Total current liabilities
Long-term debt
Common stock
Retained earnings
Total shareholders' equity
Total liabilities and shareholder's equity
Memo:

Total liabs and equity less Plug debt

Pro forma assumptions


Sales growth
Cost of sales/Sales
SG&A/Sales
Depreciation
Interest rate (blended)
Income tax rate
Dividend payout rate

1993

Historical
1994

1995

$ 16,230
$ 9,430
$ 6,800
$ 5,195
$
160
$
119
$ 1,326
$
546
$
780
$
155

$ 20,355
$ 11,898
$ 8,457
$ 6,352
$
180
$
106
$ 1,819
$
822
$
997
$
200

$ 23,505
$ 13,612
$ 9,893
$ 7,471
$
213
$
94
$ 2,115
$
925
$ 1,190
$
240

$
$
$
$
$
$
$
$
$
$

28,206
16,403
11,803
8,932
213
112
2,545
1,104
1,442
289

$
$
$
$
$
$
$
$

508
2,545
1,630
4,683
3,232
1,335
1,897
6,580

$
$
$
$
$
$
$
$

609
3,095
1,838
5,542
3,795
1,515
2,280
7,822

$
$
$
$
$
$
$
$

706
3,652
2,190
6,548
4,163
1,728
2,435
8,983

$
$
$
$
$
$
$
$

858
4,365
1,625
6,848
6,163
1,941
4,222
11,070

125

125

125

$
$
$
$
$
$
$
$

1,042
1,145
2,312
1,000
1,135
2,133
3,268
6,580

$
$
$
$
$
$
$
$

1,325
1,432
2,882
875
1,135
2,930
4,065
7,822

$
$
$
$
$
$
$
$

1,440
1,653
3,218
750
1,135
3,880
5,015
8,983

$
$
$
$
$
$
$
$
$
$

125
374
1,792
1,986
4,277
625
1,135
5,033
6,168
11,070

6,580

7,822

8,983

10,695

Source
given in case
historical average
historical average
given in case
given in case
historical average
historical average

Cash to sales ratio


Receivables to sales ratio
Inventory assumption
Gross CAPEX
Current maturity LTD
Payables to sales ratio
Accruals to sales ratio
Additions to common stock

Pro Forma
1996

1996
20%
58.2%
31.7%
213
10.0%
43.4%
20.0%

historical average
historical average
96 given in case; 97 per historical average
$
given in case
$
historical amortization
$
historical average
historical average
given in case
$

3.0%
15.5%
1,625
2,000
125
6.4%
7.0%
-

ma Financial Statements for Tire City, Inc.


Pro Forma
1997
$
$
$
$
$

$
$
$
$
$
$
$

$
$
$

33,847
19,684
14,163
10,718
333
217.7
2,894.38
1,255.2
1,639.2
327.83

1,029.57
5,237.61
3,203.06
9,470
6,563
2,274
4,289
13,759
125
1,552
2149.964003
2,383.11
6,210
500
1,135
6,344.10
7,479.10
13,759
12,207.48

1997

20%
58.2%
31.7%
333
10.0%
43.4%
20.0%

$
$

3.0%
15.5%
3,203.06
400
125
6.4%
7.0%
-

Performance Ratios Tire City, Inc.


1993

1994

1995

1996

1997

Profitability
Return on Sales
Return on Assets
Return on Equity

4.81%
11.85%
23.87%

4.90%
12.75%
24.53%

5.06%
13.25%
23.73%

5.11%
13.02%
23.37%

2.03
1.32

1.92
1.29

2.03
1.35

1.60
1.22

2.01
0.50
10.14

1.92
0.48
16.16

1.79
0.44
21.50

1.79
0.44
21.64

2.47
57.24
63.09

2.60
55.50
56.39
39.95

2.62
56.71
58.72
37.64

2.55
56.48
36.16
41.29

Liquidity
Current Ratio
Quick Ratio
Leverage
Assets/Equity
Debt/Total Capital
Interest Coverage
Activity Ratios
Asset Turnover
Days of Receivables
Days of Inventory
Days of Payables