Chris Guthrie was recently hired by S&S Air, Inc., to assist the company with its financial planning and to evaluate the companys 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 companys 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.

1. calculate the ratios for S&S air that are shown for the industry.

2. Mark and Todd agree that a ratio analysis can provide a measure of the companys performance. they have chosen boeing as an aspirant company. would you choose boeing as an aspirant company. why or why not?

3. compare the performance of S&S air to the industry. For each ratio, comment on why it might be viewed as positive or negative relative to the industry. suppose you create an inventory ratio calculated by inventory divided by current liabilities. How do you think S&S airs ratio would compare to the industry average?

4. calculate the internal growth rate and sustainable growth rate for S&S air. what do these numbers mean?

S&S Air, Inc. 2019 Income Statement Sales $26,501,500 19,780 200 3.166,700 Cost of goods sold Other expenses Depreciation EBIT 864,500 $ 2,690.200 479 200 $ 2.211,000 Interest Taxable income Taxes (2196) Net income 464,310 $ 1.746,690 Dividends $270.600 Additions to retained earnings 1,476,090 S&S Air, Inc. 2019 Balance Sheet Assets Liabilities and Equity Current assets Cash $ 944,698 > 1,909,248 5 2.853.946 Accounts receivable Inventory Total current assets Fixed assets Net plant and equipment Current liabilities 5 481.852 Accounts payable 2,025,778 Notes payable 1.634,820 Total current liabilities $ 4.142,450 Long-term debt $16.256,698 Shareholder equity Common stock Retained earnings Total equity $20 390.148 Totallabies and equity $ 5.000.000 > 5 190.000 12,295,202 > 513485,202 $20.399,148 Total assets Light Airplane Industry Ratios Lower Quartile Median Upper Quartile 1.89 .50 1.43 .64 .84 1.05 .08 21 39 .68 .85 1.13 4.89 6.15 10.89 6.27 9.82 11.51 Current ratio Quick ratio 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 .31 52 61 58 1.08 1.56 1.58 2.08 256 5.18 8.06 9.83 5.84 8.43 10.27 4.05% 6.7596 8.4796 Return on assets 6.05% 10.53% 13.2196 9.93% Return on equity 16.54% 26.1596