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. Friends Mark Sexton and Todd Story founded S&S Air 10 years ago. 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 18 months - 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.

SAS Air, Inc. 2014 Income Statement
Sales	$24,092,400
Sales Cost of goods sold	17,982,000
Other expenses	2,878,800
Depreciation	786,000
EBIT	$ 2,445,600
Interest	434,400
Taxable income	$ 2,011,200
Taxes (40%)	804,480
Net income	$ 1,206,720
Dividends	$246,000
Add. to retained earnings	$960,720

SAS Air, Inc. 2014 Balance Sheet
Assets		Liabilities & Equity
Current assets		Current liabilities
Cash	$ 438,048	Accounts payable	$ 858,816
Accounts receivable	1,841,616	Notes payable	1,735,680
Inventory	1,486,200	Total current liabilities	$ 2,594,496
Total current assets	$ 3,765,864	Long-term debt	$ 4,590,000
Fixed assets		Shareholder equity
Net plant and equipment	$14,778,816	Common stock	$ 180,000
		Retained earnings	$11,180,184
		Total equity	$11,360,184
Total assets	$18,544,680	Total liabilities & equity	$18,544,680

Light Airplane Industry Ratios
	Lower Quartile	Median	Upper Quartile
Current ratio	0.50	1.43	1.89
Quick ratio	0.64	0.84	1.05
Cash ratio	0.08	0.21	0.39
Total asset turnover	0.68	0.85	1.28
Inventory turnover	4.89	6.15	10.89
Receivables turnover	6.27	9.82	11.51
Total debt ratio	0.31	0.52	0.61
Debt-equity ratio	0.58	1.08	1.56
Equity multiplier	1.58	2.08	2.56
Times interest earned	5.18	8.06	9.83
Cash coverage ratio	5.84	8.43	10.27
Profit margin	4.05%	5.15%	6.47%
Return on assets	6.05%	10.53%	13.21%
Return on equity	9.93%	16.54%	26.15%

QUESTIONS:

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

b. 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?

c. 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 Air's ratio would compare to the industry average?

d. Calculate the internal growth rate and sustainable growth rate for S&S Air. What do these numbers mean?