HIGH TIRE PERFORMANCE

Jia Deng, Elias Eid, Giulia Germani and Sofía Margarita

 SWOT ANALYSIS
STRENGTHS OPPORTUNITIES
• Family business • Taking advantage of Jenny Chen’s expertise to improve
• Long trajectory in the business operations.
• A high number of outlets offering tires and automotive
maintenance services.

WEAKNESSES
• Bad reputation among clients lately.
• High staff turnover.
• Disorganized management style
• Younger, less experienced staff with much poorer customer • Relationship with Toronto Dominion Bank in jeopardy that
service skills.
• Bad sales & operations planning which resulted in poor
quality products, alienated customers, and underutilized
outlets.
• Gross profit 39%, Operating profit 5,5% and Net profit 0,25%.
(Industry’s ratios 42%, 12% and 6,71%, respectively)
THREATS
• Canadian Tires and other local services stations lowered their
prices and improved customer service.
• Forecasted slowdown in the local economy for 2004.
could lead to the bank to terminate the line-of-credit and
affect the long-term debt (Assets are holding up with 75% of
liabilities).
 HPT FINANCIAL CONDITION
Ratio 2003 2002 2001 Industry Avg.
Current Ratio 0.93 1.36 1.88 1.9 Liquidity
Cash ratio 0.04 0.16 0.38 0.51
Total Assets Turnover 1.07 1.46 1.72 2
Fixed Assets Turnover 1.34 1.93 2.56 3.19
A/R Turnover days 13.34 9.70 10.14 30
Asset
Inventory Turnover days 96.66 77.95 81.11 60 Management
A/P Turnover days 40.56 17.79 14.87 15
Debt Ratio 75.25% 60.53% 35.00% 30.00% Long-term debt

Times interest earned 0.08 2.06 7.87 14.63

Gross Profit Margin 39.00% 39.00% 40.00% 42.00% Profitability

Operating profit Margin 5.53% 8.83% 11.09% 12.00%

Net Profit Margin 0.25% 3.56% 5.90% 6.71%
ROI 0.45% 8.68% 16.95% 13.42%

ROE 1.09% 13.19% 15.65% 19.17%

 HORIZONTAL AND VERTICAL ANALYSIS

Income Statement Income Statement Income Statement

For Year ending December 31 Horizontal Analysis Vertical Analysis
2003 2002 2001 2003 2002 2003 2002 2001
Sales 6,500,000 € 5,550,000 € 4,050,000 € 160.5% 137.0% 100.0% 100.0% 100.0%

-Cost of Goods Sold 3,965,000 € 3,385,500 € 2,430,000 € 163.2% 139.3% 61.0% 61.0% 60.0%

Gross Profit 2,535,000 € 2,164,500 € 1,620,000 € 156.5% 133.6% 39.0% 39.0% 40.0%

-Depreciation 485,600 € 287,200 € 158,500 € 306.4% 181.2% 7.5% 5.2% 3.9%

Other Operating Expenses 1,690,000 € 1,387,500 € 1,012,500 € 166.9% 137.0% 26.0% 25.0% 25.0%

Ernings Before Interest and Taxes 359,400 € 489,800 € 449,000 € 80.0% 109.1% 5.5% 8.8% 11.1%

-Interest 331,956 € 160,125 € 50,645 € 655.5% 316.2% 5.1% 2.9% 1.3%

Earings Before Taxes 27,444 € 329,675 € 398,355 € 6.9% 82.8% 0.4% 5.9% 9.8%

-Income Taxes 10,978 € 131,870 € 159,342 € 6.9% 82.8% 0.2% 2.4% 3.9%

Net Income 16,466 € 197,805 € 239,013 € 6.9% 82.8% 0.3% 3.6% 5.9%
 HORIZONTAL AND VERTICAL ANALYSIS
Balance Sheet Balance Sheet Balance Sheet
For Year Ending December 31 Horizontal Analysis Vertical Analysis
2003 2002 2001 2003 2002 2003 2002 2001
Cash 57,000 € 110,000 € 155,000 € 36.8% 71.0% 0.9% 2.9% 6.6%

Accounts Receivable 95,000 € 59,000 € 45,000 € 211.1% 131.1% 1.6% 1.6% 1.9%
Inventories 1,050,000 € 723,000 € 540,000 € 194.4% 133.9% 17.2% 19.0% 23.0%

Prepaid Expenses 42,000 € 36,000 € 25,000 € 168.0% 144.0% 0.7% 0.9% 1.1%

Total Current Assets 1,244,000 € 928,000 € 765,000 € 162.6% 121.3% 20.4% 24.4% 32.6%

Property, Plant and Equipment 7,288,800 € 4,819,200 € 3,245,000 € 224.6% 148.5% 119.5% 126.8% 138.1%
Less: Accumulative Depreciation 2,432,800 € 1,947,200 € 1,660,000 € 146.6% 117.3% 39.9% 51.2% 70.6%

Net Property, Plant and Equipment 4,856,000 € 2,872,000 € 1,585,000 € 306.4% 181.2% 79.6% 75.6% 67.4%

Total Assets 6,100,000 € 3,800,000 € 2,350,000 € 259.6% 161.7% 100.0% 100.0% 100.0%

Accounts Payable 440,556 € 165,000 € 99,000 € 445.0% 166.7% 7.2% 4.3% 4.2%

Line of Credit 570,638 € 353,000 € 267,435 € 213.4% 132.0% 9.4% 9.3% 11.4%

Current Portion of Long-term Debt 325,346 € 162,000 € 41,460 € 784.7% 390.7% 5.3% 4.3% 1.8%

Total Current Liabilities 1,336,540 € 680,000 € 407,895 € 327.7% 166.7% 21.9% 17.9% 17.4%

Long-term Debt 3,253,460 € 1,620,000 € 414,605 € 784.7% 390.7% 53.3% 42.6% 17.6%

Equity 1,510,000 € 1,500,000 € 1,527,500 € 98.9% 98.2% 24.8% 39.5% 65.0%

Total Liabilities and Equity 6,100,000 € 3,800,000 € 2,350,000 € 259.6% 161.7% 100.0% 100.0% 100.0%
 CASH FLOW STATEMENTS

Cashflow from operations 2002 Cashflow from operations 2003

Net income 197,805 € Net income 16,466 €

Adjustment Adjustment
Depreciation 287,200 € Depreciation 485,600 €
Increase Acc receivable - 14,000 €
Increase Acc receivable - 36,000 €

Increase Inventory - 183,000 €

Increase Inventory - 327,000 €
Increase Prepaid expense - 11,000 € Increase Prepaid expense - 6,000 €
Increase accounts payable 66,000 € Increase accounts payable 275,556 €

Net cash 343,005 € Net cash 408,622 €

 WORKING CAPITAL

Ratio 2003 2002 2001

Working Capital -92540.00 248000.00 357105.00

THANK YOU!