Financial ratios

1. Using the financial statements of JJ Air provided below, calculate each of the financial ratios listed in the table for the light aircraft industry.
2. Compare the performance of JJ 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 as inventory divided by current liabilities. How do you think S&S Air's ratio would compare to the industry average?

JJ AIR FINANCIAL STATEMENTS

Tax rate	25%
Sales	$ 37,038,492
COGS	27,629,530
Other expenses	4,696,692
Depreciation	1,659,882
EBIT	$ 3,052,388
Interest	580,078
Taxable income	$ 2,472,310
Taxes (25%)	618,078
Net income	$ 1,854,232
Dividends	$ 565,000
Add to RE	$ 1,289,232

Assets
Current Assets
Cash	$ 419,970
Accounts rec.	674,475
Inventory	988,129
Total CA	$ 2,082,574
Fixed assets
Net PP&E	$ 16,305,556
Total Assets	$ 18,388,130

Liabilities & Equity
Current Liabilities
Accounts Payable	$ 854,685
Notes Payable	1,951,642
Total CL	$ 2,806,327
Long-term debt	$ 5,100,000
Shareholder Equity
Common stock	$ 410,000
Retained earnings	10,071,803
Total Equity	$ 10,481,803
Total L&E	$ 18,388,130

Light Airplane Industry Ratios

Light Airplane Industry Ratios
		Lower Quartile	Median	Upper Quartile
	Current ratio	0.50	1.43	1.89
	Quick ratio	0.21	0.35	0.62
	Cash ratio	0.08	0.21	0.39
	Total asset turnover	0.68	0.85	1.38
	Inventory turnover	4.89	6.15	10.89
	Receivables turnover	6.28	9.82	14.11
	Total debt ratio	0.41	0.52	0.61
	Debt-equity ratio	0.68	1.08	1.56
	Equity multiplier	1.68	2.08	2.56
	Times interest earned	5.18	8.06	9.83
	Cash coverage ratio	5.84	9.41	10.27
	Profit margin	4.05%	5.10%	7.15%
	Return on assets	6.05%	9.53%	13.21%
	Return on equity	9.93%	15.14%	19.15%