Bigger Isn't Always Better
Solution to Case 2
Financial Ratio Analysis
Bigger Isn't Always Better!
Table I
Quickfix Autoparts
Balance Sheet
2000
2001
$155,000
10,000
250,000
$309,099
12,000
270,000
$75,948
20,000
500,000
$28,826
77,653
520,000
$18,425
90,078
560,000
$415,000
$591,099
$595 ,948
$626,480
$668 ,50 3
$250,000
(25,000)
$250,000
(50,000)
$500,000
(100,000)
$500,000
(150,000)
$500,000
(200,000)
$225 ,000
$200 ,000
$400,000
$350,000
$300,000
Total assets
$640,000
$791,099
$995,948
$976,480
$968,503
LIABILITIES AND EQUITIES
Short-term bank loans
Accounts payable
Accrua ls
$50, 000
10,000
5,000
$145,000
10,506
5,100
$140,000
19,998
7,331
$148,000
15,995
9,301
$148 ,000
16,795
11,626
$65 ,000
$160,606
$167,329
$173,296
$176,421
$63,366
175,000
$98,000
173,000
$196,000
271,000
$190,000
268,000
$183,000
264,000
Long-term debt
$238,366
$271,000
$467 ,000
$458,000
$447,000
Total liabilities
$303,366
$431,606
$634,329
$631,296
$623,421
$320,000
16,634
$320,000
39,493
$320,000
41,619
$320,000
25,184
$320,000
25,082
Total equity
$336,634
$359,493
$361,619
$345,184
$345,082
Total liabilities and equity
$640,000
$791,099
$995 ,948
$976,480
$968 ,503
ASSETS
Cash and marketable securities Accounts receivable
Inventory
Current assets
Land , buildings, plant, and equipment
Accumulated depreciation
Net fixed assets
Current liabilities
Long-term bank loans
Mortgage
Common stock (100,000 shares)
Retained earnings
1
2002
2003
2004
Table II
Quickfix Autoparts
Income Statement
2000
2001
2002
2003
$600,000
480,000
$655 ,000
537,100
$780,000
655,200
$873,600
742,560
$1,013,376
861,370
$120,000
$117,900
$124,800
$131,040
$152,006
$30,000
25,000
Financial Ratio Analysis
Bigger Isn't Always Better!
Table I
Quickfix Autoparts
Balance Sheet
2000
2001
$155,000
10,000
250,000
$309,099
12,000
270,000
$75,948
20,000
500,000
$28,826
77,653
520,000
$18,425
90,078
560,000
$415,000
$591,099
$595 ,948
$626,480
$668 ,50 3
$250,000
(25,000)
$250,000
(50,000)
$500,000
(100,000)
$500,000
(150,000)
$500,000
(200,000)
$225 ,000
$200 ,000
$400,000
$350,000
$300,000
Total assets
$640,000
$791,099
$995,948
$976,480
$968,503
LIABILITIES AND EQUITIES
Short-term bank loans
Accounts payable
Accrua ls
$50, 000
10,000
5,000
$145,000
10,506
5,100
$140,000
19,998
7,331
$148,000
15,995
9,301
$148 ,000
16,795
11,626
$65 ,000
$160,606
$167,329
$173,296
$176,421
$63,366
175,000
$98,000
173,000
$196,000
271,000
$190,000
268,000
$183,000
264,000
Long-term debt
$238,366
$271,000
$467 ,000
$458,000
$447,000
Total liabilities
$303,366
$431,606
$634,329
$631,296
$623,421
$320,000
16,634
$320,000
39,493
$320,000
41,619
$320,000
25,184
$320,000
25,082
Total equity
$336,634
$359,493
$361,619
$345,184
$345,082
Total liabilities and equity
$640,000
$791,099
$995 ,948
$976,480
$968 ,503
ASSETS
Cash and marketable securities Accounts receivable
Inventory
Current assets
Land , buildings, plant, and equipment
Accumulated depreciation
Net fixed assets
Current liabilities
Long-term bank loans
Mortgage
Common stock (100,000 shares)
Retained earnings
1
2002
2003
2004
Table II
Quickfix Autoparts
Income Statement
2000
2001
2002
2003
$600,000
480,000
$655 ,000
537,100
$780,000
655,200
$873,600
742,560
$1,013,376
861,370
$120,000
$117,900
$124,800
$131,040
$152,006
$30,000
25,000