Other Guidelines The report with your solution should be formatted as a scientific report (or a mini-thesis) and should contain all the information necessary to be able to o understand the procedures you used to arrive at your solution o understand why you used these procedures (always give clear arguments) o see the results of your computations (I do NOT accept references in the text such as see the Excel sheet). In contrast, put your results in clearly structured tables in your main text. I should be able to read and quote your report without having to open additional files. o see that you have thought about the interpretation of the results. Case One: 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 companys 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 Max Sexton and Todd Story. The company has manufactured and sold light airplanes over this period, and the companys 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. Thecompany has two models; the Birdie, which sells for GHS 53,000, and the Eagle, which sells for GHS 78,000. 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 company 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 onehalf 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. 2021 Income Statement GHS Sales 30,499,420 Cost of goods sold 22,224,580 Other expenses 3,867,500 Depreciation 1,366,680 EBIT 3,040,660 Interest 478,240 Taxable Income 2,562,420 Taxes (40%) 1,024,968 Net income 1,537,452 Dividends GHS560,000 Add to retained earnings 977,452Assets Liabilities and Equity GHS GHS Current assets Current liabilities Cash 441,000 Accounts payable 889,000 Accounts receivable 708,400 Notes payable 2,030,000 Inventory 1,037,120 Total current liabilities 2,919,000 Total current assets 2,186,520 Long-term debt 5,320,000 Fixed assets Shareholder equity Net plant and equipment 16,122,400 Common stock 350,000 Retained earnings 9,719,920 Total equity 10,069,920 Total assets 18,308,920 Total liabilities and equity 18,308,920 Light Airplane Industry Ratios Lower Quartile Median Upper Quartile Current ratio 0.50 1.43 1.89 Quick ratio 0.21 0.38 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 6.27 9.82 14.11 Total debt ratio 0.44 0.52 0.61 Debt-equity ratio 0.79 1.08 1.56 Equity multiplier 1.79 2.08 2.56 Times interest earned 5.18 8.06 9.83 Cash coverage ratio 5.84 8.43 10.27 Profit margin 4.05% 6.98% 9.87% Return on assets 6.05% 10.53% Return on equity 9.93% 16.54% 26.15%: 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 companys 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 Design 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 Airs ratio would compare to the industry average?