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Ivey Business Case You will use the case titled 'High Performance Tire' for the group project. To purchase the case, please click on the link below:...

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Ivey Business Case
You will use the case titled 'High Performance Tire' for the group project. To purchase the case, please click on the link below:
 https:
www.iveypublishing.ca/s/ivey-coursepack/a1R5c00000F24NDEAZ/acct XXXXXXXXXXwinter-term-1212-oa01
Price is $2.65
Note: For copyright reasons, each student needs to buy the case from the publisher.
Questions
 A) Prepare the following financial exhibits for 2001, 2002 and 2003
· Ratio table (see Note 1) (12 marks)
· Vertical analysis of income statements and balance sheets (7 marks).
· Horizontal analysis of income statements and balance sheets using 2001 as the base year (7 marks).
· Statement of cash flows (2002 and 2003 only) (14 marks).
B) Assume the position of Jenny Chen and prepare a two-page memorandum that analyses the financial condition of HPT and makes recommendations for the future. Specifically, the memo should be divided into sections describing liquidity, profitability and solvency. A final recommendation should discuss what Jane Wallace should do to address the problems at HPT and what might be done in the longer term relating to the management of the company (60 marks).
Note
1. Calculate these ratios: cu
ent ratio, average collection period, days in inventory, debt to total assets, times interest earned, gross profit margin, profit margin, asset turnover, return on assets and return on shareholders’ equity.
*Assume that the accounts receivable, inventory, total assets and shareholders’ equity balances as of December 31, 2000 were same as the balances as of December 31, 2001.
2. For investing activities, cash spent on purchasing property, plant and equipment in 2002 and 2003 was$1,574,200 and $2,469,600 respectively.
3. The memo must not exceed two pages.
4. Thoroughness of analysis
·          Liquidity – 14 marks
·          Solvency – 12 marks
·          Profitability – 18 marks
·          Recommendation (Minimum of four) – 12 marks
* Make sure you use case facts as well as the ratios to do a critical evaluation of the company’s financial health.
5. Memo layout – 4 marks
6. The memo should be a Word document while the financial exhibits should be put in an Excel file. 
7. One person from each group should hand in a Word document and an Excel file containing your answers to the requirements by the due date. 
Answered 2 days AfterMar 13, 2022

Solution

Ayushi answered on Mar 16 2022
60 Votes
3
High Performance Tired Ltd
Contents
Introduction:    3
Profitability:    3
Liquidity:    3
Asset Management:    4
Long Term Debt:    4
Conclusion and recommendation:    5
References:    6
Introduction:
High Performance Tired Ltd is ca
ying out the business related to the high quality tires and it’s been approximately five years of running this business. It was formed in 1952 by Ha
y and Edna Wallace. Later on the helmed High Performance Tired Ltd to Jane Wallace, their daughter and she ran the business till 2001. After 2001, the responsibility of the company was given in the hands of son of Jane Wallace, William Wallace. William has good specialization the areas of finance and marketing and is a MBA graduate. When William took the responsibility and started applying his knowledge and skills in the company he immediately introduced an expansion strategy with an objective of increasing the number of outlets and diversification of the product portfolio. After William took control of the business, there were declining profits and poor performance especially of the retail sector due to that Jane has to again taken control of the business. Now in this report we will discuss regarding the performance of the company in the recent years by discussing about liquidity, profitability and many other factors regarding the company and provide a suitable recommendation for a good future of the company.
Profitability:
Profitability Ratios are considered as good indicators for the purpose of evaluating the profitability of a company on an overall basis. One of such ratio is the gross profit margin which makes a measurement regarding the revenue that is left or is remaining after adjusting the cost of goods sold ("Profitability Ratios", 2022). If we look at the gross profit margin ratio of HTP Ltd, then in 2001 it has a GP margin of 40% which came down to 39% in 2002 and remained same at 39% in 2003. As we can see that the industry average for the gross profit margin is 42% and the Company’s GP margin is also around this only but the profit has declined by 1% under the...
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