CHAPTER CASE Ratios and Financial Planning at S&S Air, Inc. hris Guthrie was recently hired by S&S Air, Inc., to Cassist company its financial planning 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 compa- ny'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 air- planes. 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 receives a deposit on each order, as well as another par- tial payment before the order is complete. In contrast, 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. Sales S&S AIR, INC 2022 Income Statement Cost of goods sold Other expenses Depreciation EBIT Interest: Taxable income Taxes (21%) Net income Dividends Additions to retained earnings $ 297,660 $1,621,803 $29,151,760 21,758,220 3,483,370 952,300 $ 2,957,870 528,170 $ 2,429,700 510,237 $ 1,919,463 S&S AIR, INC. 2022 Balance Sheet Assets Current assets Cash $ 530,037 Accounts receivable 2,228,356 Inventory 1,798,302 Total current assets $4,556,695 Fixed assets Net plant and equipment $17,882,368 Liabilities and Equity Current liabilities Accounts payable Notes payable Total current liabilities Long-term debt Shareholder equity Common stock $ 1,039,168 2,100,173 $3,139,341 $ 5,570,000 $ 210,000 Retained earnings Total assets $22,439,063 Total equity Total liabilities and equity 13,519,722 $13,729,722 $22,439,063