STRONG TIE LTD

STRONG TIE LTDCASE STUDYPRESENTED BY,ASSETS OF TSM1Strong Tie Ltd., located in Winnipeg, Manitoba.Manufacturers of customized structural connectors used in construction.Family owned corporation found in 1946 by Bill Johnstone.After the death of Bill Johnstone in 1975, his son David(CEO) took over the business with his three daughters, Ellen(product design and production), Elizabeth(marketing, sales and distribution) and Audrey(companys finance).Pillar for Winnipeg business community.December 6, 2012CASE STUDY-ST2COMPANY BACKGROUND2Product designed based on the input from architects, draftsmen and builders.Production process is highly automated.Human resource used in packing, storing an distribution.Products produced based on customer specification. Pride on product design capability.Providing innovative solutions to unique product design in reasonable price.December 6, 2012CASE STUDY-ST3ABOUT PRODUCT60 % market share , which has fallen from 70 % in recent years.Universal Connectors, a US based firm owns 30% of market share.Remaining market share occupied by 5 Chinese producers.Sales on term of Net 60.Low buying power.Frequent delay of payment due to cash flow problem. December 6, 2012CASE STUDY-ST4CURRENT STATUS Metal prices varied considerably.Increase in demand from emerging market countries.Adopted Just-In-Time inventory practices to reduce inventory levels.Excellent relationship with unionized workforce.Investing heavily in factory automation to improve the competitiveness.Automatic packing and feeder machines to reduce labor cost.New automated warehouse.December 6, 2012CASE STUDY-ST5Contd..$2,000,000, five year, revolving agreement with the Bank of Nova Scotia.The loan has to be secured 100% by accounts receivable and inventory.Receivables were lend to 90%.60% for inventories.40% for raw material inventory.

December 6, 2012CASE STUDY-ST6FINANCINGCurrent ratio of 1.5 or more.Cash flow coverage ratio of 1.0 or higher.Long-term debt to Total capitalization ratio of 40% or less.Financial statements has to be submitted quarterly.$1,000,000 paid as salary to daughters.$500,000 paid to Katherine as a regular Income. December 6, 2012CASE STUDY-ST7LOAN REQUIREMENTIt is an indication of companys ability to meet short-term debt obligation.CURRENT RATIO = CURRENT ASSETS/CURRENT LIBILITIES

December 6, 2012CASE STUDY-ST8CURRENT RATIOYear Current ratioBenchmark Ratio20065.01420074.2920083.13Measure of company liquidity.LIQUIDITY RATIO=LIQUID ASSETS/CURRENT LIABILITY(LIQUID ASSETS=CASH+ACCOUNTS RECEIVABLE)

December 6, 2012CASE STUDY-ST9CASH RATIOYear Cash RatioBenchmark Ratio20062.850.520072.3620081.629Asses a firms financial healthGPM=(GROSS PROFIT/NET SALES)*100

December 6, 2012CASE STUDY-ST10GROSS PROFIT MARGINYear Gross Proft MarginBenchmark Ratio200635.52%32%200731.48%200827.58%To measure Companys pricing strategy and Operating efficiency.OPM=(OPERATING PROFIT/NET SALES)*100

December 6, 2012CASE STUDY-ST11OPERATING PROFIT MARGINYear Operating Profit MarginBenchmark Ratio200614.23%16%20079.42%20082.52%Used to measure profitability. A higher profit margin indicates a more profitable.NPM=(NET PROFIT/NET SALES)*100

December 6, 2012CASE STUDY-ST12NET PROFIT MARGINYear Net Profit MarginBenchmark Ratio20068.99%10%20075.47%20080.04%It shows how profitablea company'sassetsare in generatingrevenue.ROA=(NET INCOME/AVG TOTAL ASSETS )*100

December 6, 2012CASE STUDY-ST13RETURN ON ASSETSYear Retun on AssetsBenchmark Ratio200625.39%17%20078.01%20080.06%It shows how well a company uses investment funds to generate earnings growth.ROE=(NET INCOME/AVG TOTAL EQUITY)*100

December 6, 2012CASE STUDY-ST14RETURN ON EQUITYYear Return on EquityBenchmark Ratio200643.53%21%200713.79%20080.10%December 6, 2012CASE STUDY-ST15