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Cowan was recently hired by Tuxedo Air Inc. to assist the organization with its financial planning and to abate the organization's performance. Ed graduated from universitu six wears ago with a finance degree. He heen employed in the finance department of a TSX100 company since then. edo Air was founded 12 years ago by friends Mark Taulor and Jack Rodwell. The organization manufactured ad sold light airplanes over this period, and its products have received high reviews for safety and reliability. che organization has a niche market in that it sells primarily to individuals who own and flu their own airplanes. mpany has two models; the Sparrow, which sells for $53,000, and the Vulture, which sells for 7. Although the company manufactures aircraft, its operations are different from commercial aircraft companies. Tiredo Air builds aircraft to order. By using prefabricated parts, the organization can complete the manufacture of an airplane in only five weeks. The organization 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 Jack have provided the following financial statements. Ed has gathered the industry ratios for the light airplane manufacturing industry. Tuxedo Air Inc. 2015 Statement of Comprehensive Income Sales $36,594,300 Cost of goods sold 26,669,496 Other expenses 4,641,000 Depreciation 1.640.200 EBIT $ 3,648,604 Interest 573,200 Taxable income $ 3,075,404 Taxes (40%) 1,230,162 Net income $ 1,845,242 Dividends S 560,000 Add to retained earnings 1,285,242 2015 State Assets Current assets do Alr Inc. of Financial Position Liabilities and Equity Current liabilities Accounts payable Notes payable Total current liabilities $ $ 396,900 637,560 Accounts receivable 844,550 1.928,500 2,773,050 933,400 $ 1,967,860 $ 5,050,000 Inventory Total current assets Fixed assets Net plant and equipment $15,411,620 Long-term debt Owners' equity Common stock Retained earnings Total equity Total liabilities and owners' equity $ 322,500 9233.930 $ 9,556,430 $17,379,480 Total assets $17,379,480 Upper Quartile 1.89 0.62 Light Airplane Industry Ratlos Lower Quartile Median 0.50 1.43 0.21 0.38 0.08 0.21 0.68 0.85 4.89 6.15 982 0.44 0.79 1.08 1.79 2.08 5.18 8.06 5.84 8.43 4.05% 6.98% 6.05% 10.53% 993% 16.54% 0.39 1.38 10.89 14.11 0.61 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 Return on assets Return on equity 6.27 0.52 1.56 2.56 9.83 10.27 9.87% 13.21% 26.15% Questions 1. Using the financial statements provided for Tuxedo Air, calculate ach of the ratios listed in the table for the light aircraft industry. 2. Mark and Jack agree that a ratio analysis can provide a measure of the company's performance. They have chosen Bombardier as an aspirant company. Would you choose Bombardier as an aspirant company? Why or why not? There are other aircraft manufacturers Tuxedo Air could use as aspirant companies. Discuss whether it is appropriate to use any of the following companies: Boeing, XOJET, Piper Aircraft, and AeroCentury. 3. Compare the performance of Tuxedo 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 Tuxedo Air would compare to the industry average? Directions Use the case method to apply concepts, share ideas, and improve communication skills toward solving a complex business problem. You must read the case (Ratios and Financial Planning at Tuscedo Air Inc. on p. 107) carefully. Various assigned readings in this course lean toward value investing. Concepts related to financial statements and long-term financial planning (chapter 3) and valuation and future cash flows (chapter 7) will help you analyze the cases. Preparing the Case Analysis Step 1. Define the problem (15% of assignment grade) Be sure to identify the problem and not the symptom of a problem. For example, a decline in sales is a symptom of a problems you must identify the actual cause of the decline in sales. Step 2. Formulate alternative solutions to the problem (20% of assignment grade) It may be helpful to brainstorm as many solutions as you can and then narrow your list down to three or four solutions you feel are the stronges Step 3. Evaluate and compare the alternative solutions (35% of assignment grade) To evaluate alternative solutions you should konsider their strengths (e.g., increased productivity) and their weaknesses (e.g. increased cost). Step 4. Recommend and justify an effective solution (30% of assignment grade) Be sure to record the reasons why the chosen solution is most effective. In your analysis you must provide a recommendation that is supporte by your analysis Cowan was recently hired by Tuxedo Air Inc. to assist the organization with its financial planning and to abate the organization's performance. Ed graduated from universitu six wears ago with a finance degree. He heen employed in the finance department of a TSX100 company since then. edo Air was founded 12 years ago by friends Mark Taulor and Jack Rodwell. The organization manufactured ad sold light airplanes over this period, and its products have received high reviews for safety and reliability. che organization has a niche market in that it sells primarily to individuals who own and flu their own airplanes. mpany has two models; the Sparrow, which sells for $53,000, and the Vulture, which sells for 7. Although the company manufactures aircraft, its operations are different from commercial aircraft companies. Tiredo Air builds aircraft to order. By using prefabricated parts, the organization can complete the manufacture of an airplane in only five weeks. The organization 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 Jack have provided the following financial statements. Ed has gathered the industry ratios for the light airplane manufacturing industry. Tuxedo Air Inc. 2015 Statement of Comprehensive Income Sales $36,594,300 Cost of goods sold 26,669,496 Other expenses 4,641,000 Depreciation 1.640.200 EBIT $ 3,648,604 Interest 573,200 Taxable income $ 3,075,404 Taxes (40%) 1,230,162 Net income $ 1,845,242 Dividends S 560,000 Add to retained earnings 1,285,242 2015 State Assets Current assets do Alr Inc. of Financial Position Liabilities and Equity Current liabilities Accounts payable Notes payable Total current liabilities $ $ 396,900 637,560 Accounts receivable 844,550 1.928,500 2,773,050 933,400 $ 1,967,860 $ 5,050,000 Inventory Total current assets Fixed assets Net plant and equipment $15,411,620 Long-term debt Owners' equity Common stock Retained earnings Total equity Total liabilities and owners' equity $ 322,500 9233.930 $ 9,556,430 $17,379,480 Total assets $17,379,480 Upper Quartile 1.89 0.62 Light Airplane Industry Ratlos Lower Quartile Median 0.50 1.43 0.21 0.38 0.08 0.21 0.68 0.85 4.89 6.15 982 0.44 0.79 1.08 1.79 2.08 5.18 8.06 5.84 8.43 4.05% 6.98% 6.05% 10.53% 993% 16.54% 0.39 1.38 10.89 14.11 0.61 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 Return on assets Return on equity 6.27 0.52 1.56 2.56 9.83 10.27 9.87% 13.21% 26.15% Questions 1. Using the financial statements provided for Tuxedo Air, calculate ach of the ratios listed in the table for the light aircraft industry. 2. Mark and Jack agree that a ratio analysis can provide a measure of the company's performance. They have chosen Bombardier as an aspirant company. Would you choose Bombardier as an aspirant company? Why or why not? There are other aircraft manufacturers Tuxedo Air could use as aspirant companies. Discuss whether it is appropriate to use any of the following companies: Boeing, XOJET, Piper Aircraft, and AeroCentury. 3. Compare the performance of Tuxedo 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 Tuxedo Air would compare to the industry average? Directions Use the case method to apply concepts, share ideas, and improve communication skills toward solving a complex business problem. You must read the case (Ratios and Financial Planning at Tuscedo Air Inc. on p. 107) carefully. Various assigned readings in this course lean toward value investing. Concepts related to financial statements and long-term financial planning (chapter 3) and valuation and future cash flows (chapter 7) will help you analyze the cases. Preparing the Case Analysis Step 1. Define the problem (15% of assignment grade) Be sure to identify the problem and not the symptom of a problem. For example, a decline in sales is a symptom of a problems you must identify the actual cause of the decline in sales. Step 2. Formulate alternative solutions to the problem (20% of assignment grade) It may be helpful to brainstorm as many solutions as you can and then narrow your list down to three or four solutions you feel are the stronges Step 3. Evaluate and compare the alternative solutions (35% of assignment grade) To evaluate alternative solutions you should konsider their strengths (e.g., increased productivity) and their weaknesses (e.g. increased cost). Step 4. Recommend and justify an effective solution (30% of assignment grade) Be sure to record the reasons why the chosen solution is most effective. In your analysis you must provide a recommendation that is supporte by your analysis