Chris Guthrie was recently hired by S&S Air, Inc., to assist 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 Fortune 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 company'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 operations 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 partial 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 financial statements. Chris has gathered the industry ratios for the light airplane manufacturing industry.

See Attached Financial Statements

1) Calculate the ratios for S&S Air that are shown for the industry.

2) Calculate the Net Working Capital and the Operating Cash Flow for 2014 (Cash from Operations). Put on the Excell Income Sheet

3) Create a table to compare the performance of S&S Air to the industry for these ratios: Current; Quick; Total Asset Turnover; Inventory turnover; receivables turnover; total debt ratio; Debt Equity ratio; Profit margin; Return on Assets; Return on Equity.

4) Comment on why it might be viewed as positive or negative relative to the industry. How does SAS compare to the industry? Write a short paragraph to explain the position.

5) Mark and Todd agree that a ratio analysis can provide a measure of the company's performance. They have chosen Boeing as an aspirant company. Would you choose Boeing as an aspirant company? Why or why not?

Light Airplane Industry Ratios Upper Quartile 1.89 1.05 0.39 1.28 10.89 11.51 0.61 1.56 2.56 9.83 10.27 Lower Quartile Median Current ratio Quick ratic 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 0.50 0.64 0.08 0.68 4.89 6.27 0.31 0.58 1.58 5.18 5.84 4.05% 6.05% 9.93% 1.43 0.84 0.21 0.85 6.15 9.82 0.52 1.08 2.08 8.06 8.43 5.15% 10.53% 6.47% 13.21 % 26.15% 16.54% S&S Air, Inc. 2014 Balance Sheet Assets Liabilities & Equity Current assets Current liabilities Cash Accounts receivable Inventory $ 438,048 1,841,616 1,486,200 Total current assets 3,765,864 Accounts payable Notes payable $ 858,816 1,735,680 Total current liabilities $ 2,594,496 Fixed assets Long-term debt 4,590,000 Shareholder equity Common stock Net plant and equipment $14,778,816 $ 180,000 $11,180,184 $11,360,184 $18,544.680 Retained earnings Total equity Total assets $18,544,680 Total liabilities & equity S&S Air, Inc. 2014 Income Statement Sales Cost of goods sold Other expenses Depreciation EBIT Interest Taxable income Taxes (40%) Net income $24,092,400 17,982,000 2,878,800 786,000 $2,445,600 434,400 $2,011,200 804,480 $1,206,720 $246,000 Dividends Add. to retained earnings $960,720