Case 2: Bigger isn't always better!

Table 1
Quickfix Autoparts
Balance Sheet
ASSETS
Cash and marketable securities
Account receivable
Inventory
Current assets
Land, buildings, plant and equipment
Accumulated depreciation
Net fixed assets
Total assets
LIABILITIES AND EQUITIES
Short-term bank loans
Account payable
Accruals
Current liabilities
Long-term bank loans
Mortgage
Long-term debt
Total Liabilities
Common stock (100,000 shares)
Retained earnings
Total equity
Total liabilities and equity

1997
155,000
10,000
250,000
415,000
250,000
-25,000
225,000
640,000

1998
309,099
12,000
270,000
591,099
250,000
-50,000
200,000
791,099

1999
75,948
20,000
500,000
595,948
500,000
-100,000
400,000
995,948

50,000
10,000
5,000
65,000
63,366
175,000
238,366
303,366
320,000
16,634
336,634
640,000

145,000
10,506
5,100
160,606
98,000
173,000
271,000
431,606
320,000
39,493
359,493
791,099

140,000
19,998
7,331
167,329
196,000
271,000
467,000
634,329
320,000
41,619
361,619
995,948

2000
28,826
77,653
520,000
626,479
500,000
-150,000
350,000
976,479

2001
18,425
90,078
560,000
668,503
500,000
-200,000
300,000
968,503

148,000
15,995
9,301
173,296
190,000
268,000
458,000
631,296
320,000
25,184
345,184
976,480

148,000
16,795
11,626
176,421
183,000
264,000
447,000
623,421
320,000
25,082
345,082
968,503

Case 2: Bigger isn't always better!

Table 2
Quickfix Autoparts
Income Statement
1997
600,000
480,000
120,000

1998
655,000
537,100
117,900

1999
780,000
655,200
124,800

Admin and selling exp

Depreciation
Miscellaneous expenses

30,000
25,000
2,027

15,345
25,000
3,557

16,881
50,000
5,725

Total operating exp

EBIT

57,027
62,973

43,902
73,998

72,606
52,194

Interest on ST loans
Interest on LT loans
Interest on mortgage
Total interest

15,000
8,000
12,250
35,250

15,950
7,840
12,110
35,900

14,000
15,680
18,970
48,650

Before-tax-earnings

27,723

38,098

3,544

Taxes

11,089

15,239

1,418

Net income

16,634

22,859

2,126

16,634

22,859

2,126

0.17

0.23

0.02

Net sales
Cost of goods sold
Gross profit

Dividends on stock
Additions to retained earnings
EPS (100,000 shares)

2000
873,600
742,560
131,040

2001
1,013,376
861,370
152,006

43,680
50,000
17,472

40,535
50,000
15,201

111,152
19,888

105,736
46,270

13,320
15,200
18,760
47,280

13,320
14,640
18,480
46,440

-27,392

-170

-10,957

-68

-16,435

-102

-16,435

-102

-0.16

0.00