QUESTION 1 - Evaluate US Tire's financial health. How well is the company performing?

PROFITABILITY

RETURN ON SALES - A ratio widely used to evaluate a company's operational efficiency. ROS is also known as a firm's "operating profit margin". It provides insight into how much profit is being produced per dollar of sales.

Currently the company has decreasing ROS that could signal upcoming financial troubles.

RETURN ON ASSETS - An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. According to data, company uses its resources not very effectively with the constant decrease

RETURN ON EQUITY - indicates what return a company is generating on the owners' investment. The company is earning a very respectable 20% on shareholder's equity.

LIQUIDITY

CURRENT RATIO - a rough indication of a companys ability to service its current obligations. Generally, the higher the current ratio, the more capable the company is of paying its obligations. A rate of ~2:1 is considered satisfactory for most firms. This means we are looking pretty good so far.

QUICK RATIO which is also known as the ACID TEST RATIO - An indicator of a company's short-term liquidity. The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better the position of the company. A rate of ~1:1 is considered adequate.

LEVERAGE

ASSET/EQUITY RATIO indicates a company's leverage, the amount of debt used to finance the firm. A relatively high asset/equity ratio may indicate the company has taken on substantial debt merely to remain in business A rate of ~2:1 shows that the company has lots of assets and low debt and is generally a good risk.

DEBT/CAPITAL RATIO The debt-to-capital ratio gives users an idea of a company's financial structure, or how it is financing its operations, along with some insight into its financial strength. The higher the debt-to-capital ratio, the more debt the company has compared to its equity. The company almost equally uses debt and equity financing which seems to be a good policy for sound performance. (~50)

LONG-TERM DEBT TO CAPITALIZATION RATIO This value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Apparently, the company seems attractive for the investment society, as the ratio has been decreasing reaching the level of 13% in 2005. It means that the company represent a rather low risk, as it does not finance a larger portion of its capital via debt.

INTEREST COVERAGE RATIO is used to determine how easily a company can pay interest on outstanding debt. As our coverage ratio is above 1 it indicates that the company is generating sufficient revenues to satisfy interest expenses. ACTIVITY RATIOS

DAYS RECEIVABLE (DSO) - a measure of the average number of days that a company takes to collect revenue after a sale has been made. Since there is the high importance of liquidity in running a business, it is in a company's best interest to collect outstanding receivables ASAP. By quickly turning sales into cash, a company has the chance to reinvest and make more sales. The DSO of the company varies around 55 days, which is around 1.5 month, which is not that high indicator.

DAYS INVENTORY (DSI) - a financial measure of a company's performance that gives investors an insight of how long it takes a company to turn its inventory (including goods that are work in progress) into sales. Generally, the lower (shorter) the DSI the better, but it is important to note that the average DSI varies from one industry to another.

DAYS PAYABLE (DPO) - an indicator of how long a company is taking to pay its trade creditors.

QUESTION 3 - Using your set of pro forma forecast, assess the future financial health of US Tire, Inc as of the end of 2011. Will US Tires be in a stronger or weaker financial condition eight year from now?

For the year 2003 the company was earning a very impressive 21,96% on shareholder's equity. By the year 2011 this number is going to raise up to 30, 07%, which is a very good sign showing substantial growth in generating return on the owners' investment. If we speak about the liquidity of the company, its quality and adequacy of current assets to meet current obligations as they come due, the current ratio shows us a slight growth from 2 to 2,3 showing positive relation between current obligations and a companys ability to pay them. Quick ratio also shows slight growth from 1, 32 to 1, 37 indicating s the degree to which a companys current liabilities are covered by the most liquid current assets. As to leverage, asset/equity ratio indicates company's leverage at a rate of 2, 01 in 2003 to 1, 34 in 2011 showing that the company still has lots of assets and low debt. The relationship between debt and total capital shows a slight decline from 50, 33% in 2003 to 41,54% in 2011, that indicates that company has less debt compared to its equity. speaking about the long-term debt to capitalization ratio the company seems attractive for the investment society, as the ratio has been decreasing reaching the level of 6,25% in 2011. it means that the company represent a rather low risk, as it does not finance a larger portion of its capital via debt. Interest coverage ratio, used to determine how easily a company can pay interest on outstanding debt, also shows a positive tendency by growing from 12, 14 in 2003 to 26, 60 in 2011, showing that the company is generating sufficient revenues to satisfy interest expenses.

QUESTION 7 - As a lender, would you be willing to loan UTI the funds needed to expand its warehouse facilities and finance its growth? Why or why not?

We can conclude that the company business is in good shape. It could be healthier, but its decent. The company is earning a very respectable 20% on shareholder's equity. It has a high rate of asset/equity ratio showing that the company has lots of assets, low debt and is generally a good risk. As well, the company almost equally uses debt and equity financing which seems to be a good policy for sound performance. The overall performance of the company is quite good since it has good liquidity. Still, as investors we would be willing to look at the big picture as it is crucial to see also overall future plans of the company clients who make up company customer base the company team - managers and key employees