MINICASE Ratio Analysis at S&S Air, Inc. 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. Since then, he has been employed in the finance department of a Fortune 500 company. 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 Chapter 3 osing with Financial Statements Bande, which sells for $400,000, and the Eagle, which sells for $175,000 Although the company manufactures aircraft, its opera- tions are different from commercial aircraft companies. S&S Air builds aircraft to order. By using perfabricated parts, the company can complete the manufacture of an airplane in only five weeks. The company also receives a deposit on each onder, 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 onder is placed Mark and Todd have provided the following financial statements. Chris has gathered the industry ratios for the light airplane manufacturing industry. Sales Cost of goods sold Other expenses Depreciation EBIT interest Taxable income Taxes (25 Net income Dividends SAS AIR, INC. 2021 Income Statement Add to retained earnings $565,000 1.289.232 $37,038.492 27,629,530 4,696.692 1,659,882 $ 3.052388 500,078 $ 2472,310 618.078 $1854.232 545 AIR INC 95 2021 BALANCE SHEET Assets Current assets Cash $419.970 Accounts receivable Inventory 574,475 988,129 Liabilities and Equity Current liabilities Accounts payable Notes payable Total cument liabilities $ 854.685 1,951,642 $ 2.806.327 Total curent essets $2.002.574 Long-term debt $5.100.000 Food a plant and equipment $16.305.556 Shareholder equity Common stock $410,000 Retained earnings 10.071,803 Total equity $10,481,803 Total $18.388.130 Total Sabilities and equity $18,388,130 Light Airplane Industry Ratios Lower Quartile Median Upper Quartile Current ratio 50 1.43 1.89 Quick ratio 21 35 62 Cash ratio OB 21 39 Total asset turnover 68 35 1.38 Inventory turnover 4.29 6.15 10.89 Receivables turnover 6.27 982 14.11 Total debt ratio 41 52 61 Debr-equity ratio 68 1.08 1.56 Equity multiplier 1.68 2.08 2.56 Times interest eamed 5.18 8.06 983 Cash coverage ratio 5.84 941 10.27 Proft margin 4.05% 5.10% Return on assets 6.05% 9535 7.15% 13.21% Return on equity 9.93% 15.14% 19.15% QUESTIONS 1. Using the financial statements provided for S&S Air, calculate each of the ratios listed in the table for the light aircraft 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? There are other aircraft manufac turen S&S Air could use as aspirant companies Discuss whether it is appropriate to use any of the following companies: Bombardier, Embraer, and Cirrus Aircraft Corporation. 3. Compare the performance of S&S Air to the industry For cach natio, comment on why it might be viewed a 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 averag