Chris Guthrie was recently hired by S&S Air, Inc., to assist the company with its finanClal 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. S&S AIR, INC 2019 Income Statement $26,501,600 Sales Cost of goods sold 19,780,200 Other expenses 3,166,700 Depreciation 864,500 $ 2,690,200 EBIT Interest 479,200 $ 2,211,000 Taxable income Taxes (21% 464,310 $ 1,746,690 Net income $270,600 Dividends Additions to retained earnings 1,476,090 S&S AIR, INC. 2019 Balance Sheet Liabilities and Equity Assets Current assets Current liabilities $ 481,852 Accounts payable Cash 944,698 Notes payable Accounts receivable 2,025,778 1,909,248 $ 2,853,946 Inventory Total current liabilities 1,634,820 Total current assets 4,142,450 $ 5,060,000 Fixed assets Long-term debt Net plant and equipment $16,256,698 Shareholder equity $ 190,000 Common stock Retained earnings 2,295,202 Total equity $12,485,202 $20,399,148 Total liabilities and equity Total assets $20,399,148 Light Airplane Industry Ratios Lower Quartile Median Upper Quartile Current ratio .50 1.43 1.89 Quick ratio 64 .84 1.05 21 39 Cash ratio 08 Total asset turnover 68 85 1.13 Inventory turnover 4.89 6.15 10.89 Receivables turnover 6.27 9.82 11.51 Total debt ratio 61 31 52 Debt-equity ratio 58 1.08 1.56 Equity multiplier 1.58 2.08 2.56 5.18 9.83 Times interest earned 8.06 Cash coverage ratio 5.84 8.43 10.27 Profit margin 4.05% 6.75% 8.47% Return on assets 6.05% 10.53% 13.21% Return 9.93% 16.54% 26.15% T. 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 company's 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 Air's 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
