Boeing and McDonnell Douglas were two leaders in the manufacture of aircraft. In 1996 Boeing announced intentions to acquire McDonnell Douglas and create one huge corporation. Competitors, primarily Airbus of Europe, are very concerned that they will not be able to compete with such a huge rival. In addition, customers are concerned that this merger will reduce the number of suppliers to a point where Boeing will be able to dictate prices. Provided below are figures taken from the 1995 financial statements of Boeing and McDonnell Douglas, which allow a comparison of the operations of the two corporations prior to their proposed merger.

Instructions

(a) Which company had older assets?

(b) Which company used a longer average estimated useful life for its assets?

(c) Based on the asset turnover ratio, which company used its assets more effectively to generate sales?

(d) Besides an increase in size, what other factors might have motivated this merger?

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($ in millions) Total revenue Net income (loss) Total assets (average) Land (average) Boeing McDonnell Douglas $19,515 $14,322 393 (416) 22,098 10,466 404. 91 Buildings and fixtures 5,791 1,647 Machinery and equipment 7,251 2,161 Average property, plant, and equipment (at cost) 13,744 3,899 Accumulated depreciation 7,288 2,541 Depreciation expense 976 196