Chapter 2 Problem 13 a. For the years 2005 2009, calculate Boeings i. Total liabilities-to-equity ratio ii. Times interest earned ratio iii. Times burden covered ratio b. What percentage decline in earnings before interest and taxes could Boeing have sustained in these years before failing to cover i. Interest and principal repayment requirements, ii. Interest, principal and common dividend payments? c. What do these calculations suggest about Boeings financial leverage during this period? ANNUAL BALANCE SHEET ($ MILLIONS) BOEING CO Dec09 Dec08 Dec07 Dec06 Dec05 ASSETS Cash & Short-Term Investments 11 223 3 279 9 308 6 386 5 966 Net Receivables 6 153 6 027 6 068 5 655 5 613 Inventories 16 933 15 612 9 563 8 105 7 940 Other Current Assets 966 1 046 2 341 2 837 2 449 ------------------ ------------------ ------------------ ------------------ -------------- Total Current Assets 35 275 25 964 27 280 22 983 21 968 Gross Plant, Property & Equipment 21 579 21 042 20 180 19 310 19 692 Accumulated Depreciation 12 795 12 280 11 915 11 635 11 272 ------------------ ------------------ ------------------ ------------------ -------------- Net Plant, Property & Equipment 8 784 8 762 8 265 7 675 8 420 Investments at Equity 974 942 1 085 964 84 Other Investments 5 522 6 243 9 803 11 641 12 407 Intangibles 7 196 6 332 5 174 4 745 2 799 Deferred Charges - - - - 13 251 Other Assets 4 302 5 536 7 379 3 786 1 129 ------------------ ------------------ ------------------ ------------------ -------------- TOTAL ASSETS 62 053 53 779 58 986 51 794 60 058 LIABILITIES Long Term Debt Due In One Year 707 560 762 1 381 1 189 Accounts Payable 7 096 5 871 5 714 5 643 5 124 Taxes Payable 182 41 253 670 556 Accrued Expenses 12 822 6 169 6 637 6 106 6 590 Other Current Liabilities 12 076 18 284 18 172 15 901 14 729 ------------------ ------------------ ------------------ ------------------ -------------- Total Current Liabilities 32 883 30 925 31 538 29 701 28 188 Long Term Debt 12 217 6 952 7 455 8 157 9 538 Deferred Taxes - - 1 190 - 2 067 Minority Interest 97 Other Liabilities 14 728 17 196 9 799 9 197 9 206 ------------------ ------------------ ------------------ ------------------ -------------- TOTAL LIABILITIES 59 925 55 073 49 982 47 055 48 999 EQUITY Common Stock 5 061 5 061 5 061 5 061 5 061 Capital Surplus 3 724 3 456 4 757 4 655 4 371 Retained Earnings 10 869 9 150 16 780 10 236 15 498 Less: Treasury Stock 17 526 18 961 17 594 15 213 13 871 ------------------ ------------------ ------------------ ------------------ -------------- TOTAL EQUITY 2 128 (1 294) 9 004 4 739 11 059 ------------------ ------------------ ------------------ ------------------ -------------- TOTAL LIABILITIES & EQUITY 62 053 53 779 58 986 51 794 60 058 Common Shares Outstanding 726,291 698,138 736,681 757,836 760,577 ANNUAL INCOME STATEMENT Dec09 Dec08 Dec07 Dec06 Dec05 Sales 68 281 60 909 66 387 61 530 54 845 Cost of Goods Sold 55 092 48 950 51 977 48 926 44 757 ------------------- ------------------ ------------------ ------------------ --------------- Gross Profit 13 189 11 959 14 410 12 604 10 088 Selling, General, & Administrative Exp. 9 870 6 852 7 381 7 428 6 433 ------------------- ------------------ ------------------ ------------------ --------------- Operating Income Before Deprec. 3 319 5 107 7 029 5 176 3 655 Depreciation,Depletion,&Amortization 1 273 1 179 1 130 1 158 1 092 ------------------- ------------------ ------------------ ------------------ --------------- Operating Profit 2 046 3 928 5 899 4 018 2 563 Interest Expense 604 524 608 657 713 Non-Operating Income/Expense 289 591 827 709 391 Special Items (876) 578 ------------------- ------------------ ------------------ ------------------ --------------- Pretax Income 1 731 3 995 6 118 3 194 2 819 Total Income Taxes 396 1 341 2 060 988 257 ------------------- ------------------ ------------------ ------------------ --------------- Income Before Extraordinary Items & Discontinued Operations 1 335 2 654 4 058 2 206 2 562 Discontinued Operations (23) 18 16 9 (7) ------------------- ------------------ ------------------ ------------------ --------------- Adjusted Net Income 1 312 2 672 4 074 2 215 2 555