Yates Motors is a family owned and operated car dealership, which means the Yates' are directly involved in day-to-day operations and know many of their customers on a first-name basis. They are committed to the promise of something better and that's exactly why they've been satisfying customers for over 50 years. Yates Motors is about more than selling cars. Management and staff are committed to offering a total customer care experience, from purchase to ongoing maintenance of the customer's vehicle. In addition to the GMC showrooms, the dealership includes an extensive Parts and Service Department, a state-of-the-art Body Shop, and a full-service Auto Cleaning and Detailing Centre. As well, financing can be handled on the premises.

MISSION STATEMENT

The Yates Promise:

1. To be the leading provider of automotive sales and service in Central Ontario
2. To provide superior customer care through honesty, integrity and respect.
3. To provide our employees with a safe and positive workplace
4. To be a responsible business member of our community.

History
The Yates automotive story began in 1958, when Mr. George Yates opened his first Auto Repair facility in Barrie. George Yates Jr. and Peter Yates began working with their father while still quite young, and became involved on a full-time basis after graduating from university. In 1974, George Yates Sr. and his sons began selling GM automobiles. In 1988, after their father's retirement, the Yates brothers opened up their cleaning and detailing centre. Since that time, several of George Yates' grandchildren have also joined the company.

When you come to the dealership you will find a 71,000 sq ft GMC dealership and service department. The building features spacious showrooms, large, comfortable waiting areas, and customer work centers with internet access. The Yates Motors team is committed to giving back to the community that has supported them for over 50 years. Long-time supporters of countless local charities and community events, the family's efforts have assisted close to 200 charitable groups in recent years.

 

• Part 1 - Internal Sources of Funding
• Part 2 - Budget
• Part 3 - The Expansion

PART 1 - INTERNAL SOURCES OF FUNDING

 

The management of Yates Motors is considering investing $950,000 to purchase a Hyundai dealership and expand operations in Barrie. Last year's financial figures are as follows:

Prior Year - Financials

Revenues	1,850,000
Total Expenses	1,550,000
Net income	300,000

Next year the company expects sales to increase by 80% due to the expansion. The return on sales is expected to fall to 11.5% due to the initial set up costs.
Management also expects there to be changes in the working capital accounts on the balance sheet.

Due to increased sales with the new dealership, average accounts receivable is expected to increase to $160,000 - a total increase of $70,000 on last year.

Again due to the expansion, Yates' expects to take on more inventory next year. They expect it to increase by $125,000 to $525,000.

Assets
Current assets
Cash	40,000
Accounts Receivable	90,000
Inventory	400,000
Total current assets	530,000
Long term Assets
Building	800,000
equipment	310,000
TOTAL ASSETS	1,640,000
Liabilities and Equity
Current liabilities
Accounts Payable	100,000
Working Capital Loan	135,000
Total Current liabilities	235,000
Long term debts	645,000
TOTAL DEBTS	880,000
Shareholders Equity
Common Shares	360,000
Retained earnings	400,000
TOTAL SHAREHOLDERS EQUITY	760,000
TOTAL SHAREHOLDERS EQUITY and  LIABILITIES	1,640,000

Questions

1. What was the company's return on total assets last year? ( 2 marks)
2. How much cash will internal operations provide (i.e. what is generated by net income and changes in A/R, inventory etc.)? ( 3 marks)
3. How much will the company have to raise from external sources to continue with an investment of 950,000 in capital assets? ( 2 marks)

Answer rating: 100% (QA)

To answer your questions 1 Return on Total Assets last year Return on Total Assets is calculated by ... View the full answer