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STRONG TIE LTD

Evaluation of financial condition By Freaky Managers

30-12-2013

STRONG TIE LTD CASE - FREAKY MANAGERS

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OVERVIEW
• 1946 – Bill Johnstone (Family owned) • Manufacture standardized and customized structural connectors.
NAME RESPONSIBILTY

David Johnstone
Ellen Johnstone Elizabeth Johnstone

CEO
Product design and Production Marketing, Sales and

Distribution
30-12-2013

Audrey Johnstone

STRONG TIE LTD CASE - FREAKY MANAGERS

Company’s Finance

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• Less human intervention • Customized Connectors  Customer • Labour Intensive • Generated array of new standardized connectors improved on the existing • Innovative solutions  addressed newly identified industry needs. Builders. Draftsmen. 30-12-2013 STRONG TIE LTD CASE .FREAKY MANAGERS 3 .DESIGN • Standardized Connectors  Architects.

COMPETITORS AND ADOPTED POLICY Market Share 10% Strong Tie • Sales Net 60 • Purchase terms 2/10 30% 60% Universal Connector 5 Chinese Producer • Attempted to adopt just-in-time • Paying generous wages • Heavy investment in factory automation 30-12-2013 STRONG TIE LTD CASE .FREAKY MANAGERS 4 .

29 2008 3.01 2007 4.CURRENT RATIO • Current Ratio = Current Assets/Current liabilities • Higher the CR.13 Industrial Average 4 30-12-2013 STRONG TIE LTD CASE . greater the short-term solvency 2006 5.FREAKY MANAGERS 5 .

071 2008 0.FREAKY MANAGERS 6 .CASH RATIO • Cash ratio = Cash + Bank Balance / Current liabilities • Checks the ability of cash and bank balance to meet the current liabilities 2006 0. lesser the ability to meet uncertainty 30-12-2013 STRONG TIE LTD CASE .15 2007 0.5 • Lesser the cash ratio.033 Industrial Average 0.

82 DAYS 30-12-2013 2007 36.91 DAYS Industrial Average 31 DAYS 7 STRONG TIE LTD CASE . more efficient the management of inventories • Raw materials turnover in days =365/RMT 2006 35.25 DAYS 2008 41.RAW MATERIALS TURNOVER • Raw material turnover = COGS/Avg.FREAKY MANAGERS . raw materials • Reflects the rate of utilization of raw material • Higher the RMT.

WIP TURNOVER • WIP turnover = COGS/Avg.FREAKY MANAGERS 8 .98 DAYS 2007 5. lower the inventory accumulation 2006 6. WIP • Higher the ratio.75 DAYS Industrial Average 3 DAYS 30-12-2013 STRONG TIE LTD CASE .16 DAYS 2008 2.

FINISHED GOODS INVENTORY TURNOVER • FG inventory turnover = COGS/Avg. it leads to higher working capital requirements 2006 70. finished goods • High holding period is not good.3 DAYS Industrial Average 51 DAYS • Just-in-time production basis 30-12-2013 STRONG TIE LTD CASE .FREAKY MANAGERS 9 .93 DAYS 2008 44.87 DAYS 2007 56.

06 DAYS 2008 69. better the trade credit management 2006 73.A/R TURNOVER • A/R turnover = Net sales/Avg.79 DAYS Industrial Average 63 30-12-2013 STRONG TIE LTD CASE . A/R • Indicates the speed at which the receivables are collected • Shorter the period.3 DAYS 2007 70.FREAKY MANAGERS 10 .

FREAKY MANAGERS 11 . A/P 2006 18.93 DAYS Industrial Average 11 DAYS • 2/10 NET 60 30-12-2013 STRONG TIE LTD CASE .66 DAYS 2007 16.A/P TURNOVER • A/P turnover = COGS/Avg.44 DAYS 2008 15.

36 DAYS 2007 151.6 DAYS Industrial Average 137 DAYS 30-12-2013 STRONG TIE LTD CASE .CASH CONVERSION CYCLE • Cash conversion cycle = Inventory turnover + A/R turnover – A/P turnover 2006 168.94 DAYS 2008 142.FREAKY MANAGERS 12 .

fixed assets • Indicates how well the business is using its long-term assets to generate sales • Higher the ratio.FIXED ASSETS TURNOVER • Fixed Assets turnover = Net sales/ Avg.82 4.1 30-12-2013 STRONG TIE LTD CASE . effectively utilized FA investments 2006 2007 2008 Industrial Average 4.FREAKY MANAGERS 13 .11 2.61 4.

413 2007 1.46 2008 1.FREAKY MANAGERS 14 .TOTAL ASSETS TURNOVER • Total assets turnover = Net Sales/Avg. Total assets • Indicates the efficiency of assets utilization 2006 1.7 30-12-2013 STRONG TIE LTD CASE .32 Industrial Average 1.

28% 2007 32.88% 2008 37.LONG TERM DEBT TO CAPITALIZATION • Long term debt to capitalization = LT Liabilities/ [LT Liabilities + Equity] 2006 32.FREAKY MANAGERS 15 .89% Industrial Average 35% 30-12-2013 STRONG TIE LTD CASE .

48% 2008 27.58% Industrial Average 32% 30-12-2013 STRONG TIE LTD CASE .52% 2007 31.FREAKY MANAGERS 16 .GROSS PROFIT MARGIN • Gross profit ratio = Gross profit/Net sales * 100 • Indicates the efficiency • Higher GP ratio is a sign of success 2006 35.

23% 2007 9.42% 2008 2.FREAKY MANAGERS 17 .52% Industrial Average 16% 30-12-2013 STRONG TIE LTD CASE .OPERATING PROFIT MARGIN • Operating profit margin = operating profit/Net sales * 100 • Reflects the operating efficiency of the firm 2006 14.

financing and tax management 2006 8. selling.042% Industrial Average 10% 30-12-2013 STRONG TIE LTD CASE . administration.FREAKY MANAGERS 18 .99% 2007 5. pricing.47% 2008 0.NET PROFIT MARGIN • Net profit ratio = Net profit/Net sales * 100 • Measures efficiency of production.

Total asset * 100 2006 12.7% 2007 8.FREAKY MANAGERS 19 .01% 2008 0.RETURN ON ASSET • Return on asset = net income/Avg.06% Industrial Average 17% 30-12-2013 STRONG TIE LTD CASE .

FREAKY MANAGERS 20 .79% 2008 0.76% 2007 13.RETURN ON EQUITY • Return on equity = Net income/Avg. equity * 100 • Measures the profitability of equity funds invested 2006 21.101% Industrial Average 28% 30-12-2013 STRONG TIE LTD CASE .

FREAKY MANAGERS 21 .30-12-2013 STRONG TIE LTD CASE .