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in CH3 working with Financial Statements

QUESTIONS 1. Calculate the ratios for S&S Air that are shown for the industry. 2. Mark and Todd agree that a ratio analysis can pro- vide a measure of the company's performance. They have chosen Boeing as an aspirant com- pany. Would you choose Boeing as an aspirant company? Why or why not? 3. Compare the performance of S&S Air to the indus- try. For each ratio, comment on why it might be viewed as positive or negative relative to the in- dustry. Suppose you create an inventory ratio cal culated by inventory divided by current liabilities. How do you think S&S Air's ratio would compare to the industry average? 4. Calculate the internal growth rate and sustainable growth rate for S&S Air. What do these numbers mean? CHAPTER CASE Ratios and Financial Planning at S&S Air, Inc. partial payment before the order is complete. In con trest, a commercial airplane may take one and one-half to two years to manufacture once the order is placed. Mark and Todd have provided the following finan. cial statements. Chris has gathered the industry ratios for the light airplane manufacturing industry. S&S AIR, INC 2019 Income Statement Ahris Guthrie was recently hired by S&S Alt, Inc., to Cassist the company with its financial planning and to evaluate the company's performance. Chris graduated from college five years ago with a finance degree. He has been employed in the finance department of a For. tune 500 company since then. S&S Air was founded 10 years ago by friends Mark Sexton and Todd Story. The company has manufactured and sold light airplanes over this period, and the com- pany's products have received high reviews for safety and reliability. The company has a niche market in that it sells primarily to individuals who own and fly their own airplanes. The company has two models: the Birdie. which sells for $53,000, and the Eagle, which sells for $78,000 While the company manufactures aircraft, its opera tions are different from commercial aircraft companies. S&S Air builds aircraft to order. By using prefabricated parts, the company is able to complete the manufacture of an airplane in only five weeks. The company also re- ceives a deposit on each order, as well as another Sales Cost of goods sold Other expenses Depreciation EBIT Interest Taxable income Taxes (2159 Net income Dividends Additions to retained earnings $26,501,600 19.780.200 3,166,700 864,500 $ 2,690,200 479.200 $ 2,211,000 464,310 $ 1.746,690 $270,600 1,476,090 S&S AIR.INC. 2019 Balance Sheet Liabilities and Equity Current assets Cash $ 481,852 Accounts receivable 2,025,778 Inventory 1,634,820 Total current assets $ 4,142,450 Fixed assets Net plant and $16,256,698 equipment Current liabilities Accounts payable Notes payable Total current liabilities $ 944,698 1,909,248 $ 2,853.946 $ 5,060,000 Long-term debt Shareholder equity Common stock Retained earnings Total equity Total abilities and equity $ 190,000 12,295,202 $12,485,202 $20,399.148 Total assets $20,399.148 Scanned with Cams PART 2 Understanding Finance Statements and Cash Flow Light Airplane Industry Ratios Lower Quartie Median Upper Quartile .50 1.05 10.89 11.51 .61 Current ratio Quick ratio Cash ratio Total asset turnover Inventory turnover Receivables turnover Total debt ratio Debt-equity ratio Equity multiplier Times interest earned Cash coverage ratio Profit margin Return on assets Return on equity 1.56 2.56 9.83 10.27 843 8.475 4,05% 6.05% 9.93% 6.75 10.53% 16.54% 13.21% 26.15% is e ratios for S&S Air that are shown for ad agree that a ratio analysis can pro- ure of the company's performance viewed as positive or negative relativ dustry Suppose you create an invent Culated by inventory divided by curre How do you think S&S Air's ratio wou

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