90 PART 2 Financial Statements and Long Term Francial Planning own and fly their own airplanes. The company has two models the Birdie, which sells for $103.000, and the Eagle, which sells for $178,000 Although the company manufactures aircraft, its operations are different from commercial aircraft companies. S&S Air builds aircraft to order. By using prefabricated parts, the com pany can 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 state- ment. Chris has gathered the industry ratios for the light air- plane manufacturing industry. S65 AIR, INC 2018 Income Statement Sales Cost of goods sold Other expenses Depreciation EDIT Interest Taxable income Taxes 25 Net income Dividends $ 705,000 Add to retained earnings 1,612,789 $46.298,115 34 536,913 5.870.865 2.074853 $ 3.815.484 7259 $ 3,090,386 772.591 $ 2.317.789 Assets Current assets Cash Accounts receivable Inventory Total current assets 565 AIR INC 2018 Balance Sheet Liabilities and Equity Current liabilities $ 524.963 Accounts payable $ 1,068.356 843.094 Notes payable 2.439,553 1.235.161 Total current liabilities $ 3.507909 $ 2,603 218 Long-term debt $ 5.300.000 Fixed assets Net plant and equipment $20.381.945 Shareholder equity Common stock Retained earnings Total equity Total liabilities and equity $ 460,000 12,717 254 $13,177 254 $22.985,163 Total assets $22.985.163 Upper Light Airplane Industry Ratios Lower Quartile Median Current ratio 50 1.43 Quick ratio 21 .35 Cash ratio 08 21 Total asset turnover .68 85 Inventory tumover 4.89 6.15 Receivables turnover 9.82 Total debt ratio 52 Debt-equity ratio .68 1.08 Equity multiplier 1.68 208 Times Interest earned 5.18 8.05 Cash coverage ratio 5.84 9.41 405% 5.10% 6.05% 9.53% 9.93% 15.14% 627 1.89 .62 39 1.38 10.89 14.11 .61 1.56 2.56 9.83 10.27 7.15% QUESTIONS 1. Using the financial statements provided for S&S Alt calculate each of the ratios listed in the table for the light aircraft industry. 2. Mark and Todd agree that a ratio analysis can pro- vide 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? There are other aircraft manufacturers S&S Air could use as aspirant companies. Discuss whether it is appropriate to use any of the following companies: Bombardier, Embraer, Cirrus Air craft Corporation, and Cessna Aircraft Company 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 as inventory divided by current liabilities. How do you think S&S Air's ratio would compare to the industry average! Profit margin Return on assets Return on equity 13215 19.15%
