Chapter 2 Problem 14

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

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------------------

------------------

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--------------

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

Chapter 2 Problem 14

a. For the years 2005 2009, calculate Boeings

i. Total liabilities-to-equity ratio

ii. Times interest earned ratio

iii. Times burden covered ratio

Total Liabilities to equit ratio = Long term debt/ Equity funds
Total Interest earned ratiov = EBIT /Interest Expense
Total Burden Covered Ratio = EBIT / Interest Expense
	Ration Analysis
	2005	2006	2007	2008	2009
Total Long term debt	9538	8157	7455	6952	12217
Total Equity Funds	60058	51794	58986	53779	62053
EBIT	2,563.00	4,018.00	5,899.00	3,928.00	2,046.00
Interest Expense	713.00	657.00	608.00	524.00	604.00
Liabilities to Equity Ratio	0.1588	0.1574	0.1263	0.1292	0.1968
Times Interest Earned Ratio	3.59	6.11	9.7	7.49	3.38
Times Burden Covered Ratio	3.59	6.11	9.7	7.49	3.38