Tire City Essay

385 Words2 Pages
From the ratio analysis of Tire City, we can see that the company’s financial health is favorable increasing as of 1995. Tire City has a 23.8% ROE, in which it is very consistent throughout its previous years and is above average. Tire Company is very profitable; the profit margin improved from 4.90% to 5.06% in 1995. This growth is due because of the decrease in percentage sales on the cost of goods sold. Also, this increase can be attributed to the competition in the market. For every dollar of sales the company keeps the earning of 5.06%, which is a .16% increase compared to last year. Tire City’s Gross profit margin has been favorably steady through the years with a 42.09% in 1995. This might be due to an increase in selling prices, or a decrease in cost. The long term debt to capital shows that the company has an unfavorable decrease over the past years with a 13% of the debt to capital ratio. Tire City has a current ratio of 2 which shows that the company can cover its debt. In addition, the company is doing well by converting its investment into a profit with a 13.25% ROA. The company is earning more money on its’ investments which is very good for the future of the company. In 1993, the company had a19.92% on return on total capital and by 1994 it had increased to 21.36%. After that, it increase on ROTC it has been steady. Overall Tire City has proven with a solid sales growth throughout the years its success, the company sales improved from $16,230,000 in 1993 to $20,355,000 in 1994 with a favorable change of $4,125,000 or 25.24% in sales in 1994 and 15.5% sales in 1995. I found this percentage by using the four-figure standard protocol in sales. With the profitability ratios of the company we can see that the company’s performance is doing well during the last few years. There has been a slight improvement in the company’s wealth; but by increasing

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