Ratios and Financial Planning at S&S Alr.Inc. Chris Guthrie was recently hired by S&S Alt, 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. 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 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 Birdie, which sells for $53,000, and the Eagle, which sells for $78,000. While 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 is able to complete the manufacture of an alrplane 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 statements. Chris has gathered the industry ratios for the light airplane manufacturing Industry SAS AIR, INC 2019 Income Statement Sales $26,501,600 19.780.200 Cost of goods sold Other expenses Depreciation 3.166.700 864.500 $ 2,690,200 EBIT Interest 479.200 Taxable income $ 2.211,000 Taxes (21%) 464.319 Net income S 1.746,699 Dividends S2-0.600 Additions to retained entning 1.476.090 2019 Balance Sheet Assets Liabilities and Equity Current assets Current liabilities Cash $ 481,852 $. 944,698 Accounts receivable Inventory 1.909,248 Accounts payable Notes payable Total current linbilities 2,025.778 1.634.820 $12.853.946 Total current assets $ 4.142.450 Fixed assets $ 5.000.000 Net plant and equipment $16.256,698 Long-term debt Shareholder equity Common stock Retained earnings $ 190,000 12.295,202 Assets Liabilities and Equity Current assets Current liabilities Cash $ 481.852 $944698 Accounts receivable 2.025.778 Accounts payable Notes payable Total current liabilities 1.909,248 Inventory 1.634,820 $ 2.853.946 Total current issets $ 4.142.-150 Fixed assets Long-term clebt $ 5.000.000 Net plant and equipment $16.250,698 Shareholder equity Common stock 190.000 Retained earnings $1245,202 Totalets Total liabilities and equity Total assets SACK 399,113 $90.199,113 Light Airplane Industry Ratios Lower Quartile Median Upper Quartile 1.43 -50 .64 .08 1.89 1.05 .84 .21 -39 .68 .85 1.13 10.89 4.89 6.27 6.15 9.82 11.51 .61 .31 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 -52 1.08 2.08 1.56 2.56 9.83 8.06 -58 1.58 5.18 5.84 4.05% 6.05% 9.93% 8.43 6.75% 10.53% 16.54% 10.27 8.47% 13.21% 26.15% QUESTIONS 1. Calculate the ratios for S&S Alt that are shown for the 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? 3. Compare the performance of S&S Ait 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 tatio calculated by inventory divided by current abies How do you think S&S Ait's ratio would compare to the industry average? 4. Calculate the internal growth rate and sustainable growth rate for S&S Al Wrat do these numbers mean? PROTECTIO VIEW Be carefules from the internet can conta wuses Unless you need to edit safe to stay in Protected View Enable ding A19 Total H Name: Studen ID: Section No.1 Formula Unit Result D FIN220 Marking rubrics 2 301 4 Ratio Current Ratio 6 Quick Ratio Cash Ratio Total Asset Turnover Inventory Turnover 10 Receivables Turnover 11 Total Debt Ratio 12 Debt-Equity Ratio 13 Equity Multiplier 14 Times Interest Earned 15 Cash Coverage Ratio 10 Profit Martin 17 Return on Assets th Ieturn an Equity Point 1 1 1 1 1 Point 1 1 1 1 1 1 1 1 1 1 Point 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Total 14 14 14 42 pois 20 21 22 Q2 10 polr 26 > Q3 Solution Sheet Type here to search enovo Total Reference for comparing the attemy Point Short analysis Point Light Airplane Indy Banos 1 Love Lupe 1 el Ratio Resu Untevora Current Ratio Quick Rab Cash Ratio TO Ante Turnove hemory Tune Recewables Turnov 1 050 1 1 BO 105 004 1 1 1 1 Curen Rai Qack Rate Cho Tot Arpetu Inventor Tuner 2 0.08 4.89 12 Torslebt Ratio 1 6:27 111 0.01 Debt-Equio 3 Euty Muller Tmes heren End 1 Ch Coverage hala Megin Return on Anne 1 1 1 1 1 Recewables Tune Total De Rario Debi-Equay Ratio E Maple Tiesien Cash Cover RA Pole Megin 031 050 150 5.10 56 052 100 200 0.00 43 5152 256 3.00 1 4052 647/ 1 Beruin ona To Return on Aure Rannan 14 23 point M Deeper analysis on current and quick ratio 6 points Orwerpretation 10 points 14 Laculation LO 04 Formula Calculation Point Retention Ratio 4 4 4 Overall Interpretation Internal Growth 8 Sustainable Growth 9 0 * 1 272 73 74 3 Total 15 points Solution Sheet Ratios and Financial Planning at S&S Alr.Inc. Chris Guthrie was recently hired by S&S Alt, 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. 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 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 Birdie, which sells for $53,000, and the Eagle, which sells for $78,000. While 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 is able to complete the manufacture of an alrplane 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 statements. Chris has gathered the industry ratios for the light airplane manufacturing Industry SAS AIR, INC 2019 Income Statement Sales $26,501,600 19.780.200 Cost of goods sold Other expenses Depreciation 3.166.700 864.500 $ 2,690,200 EBIT Interest 479.200 Taxable income $ 2.211,000 Taxes (21%) 464.319 Net income S 1.746,699 Dividends S2-0.600 Additions to retained entning 1.476.090 2019 Balance Sheet Assets Liabilities and Equity Current assets Current liabilities Cash $ 481,852 $. 944,698 Accounts receivable Inventory 1.909,248 Accounts payable Notes payable Total current linbilities 2,025.778 1.634.820 $12.853.946 Total current assets $ 4.142.450 Fixed assets $ 5.000.000 Net plant and equipment $16.256,698 Long-term debt Shareholder equity Common stock Retained earnings $ 190,000 12.295,202 Assets Liabilities and Equity Current assets Current liabilities Cash $ 481.852 $944698 Accounts receivable 2.025.778 Accounts payable Notes payable Total current liabilities 1.909,248 Inventory 1.634,820 $ 2.853.946 Total current issets $ 4.142.-150 Fixed assets Long-term clebt $ 5.000.000 Net plant and equipment $16.250,698 Shareholder equity Common stock 190.000 Retained earnings $1245,202 Totalets Total liabilities and equity Total assets SACK 399,113 $90.199,113 Light Airplane Industry Ratios Lower Quartile Median Upper Quartile 1.43 -50 .64 .08 1.89 1.05 .84 .21 -39 .68 .85 1.13 10.89 4.89 6.27 6.15 9.82 11.51 .61 .31 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 -52 1.08 2.08 1.56 2.56 9.83 8.06 -58 1.58 5.18 5.84 4.05% 6.05% 9.93% 8.43 6.75% 10.53% 16.54% 10.27 8.47% 13.21% 26.15% QUESTIONS 1. Calculate the ratios for S&S Alt that are shown for the 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? 3. Compare the performance of S&S Ait 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 tatio calculated by inventory divided by current abies How do you think S&S Ait's ratio would compare to the industry average? 4. Calculate the internal growth rate and sustainable growth rate for S&S Al Wrat do these numbers mean? PROTECTIO VIEW Be carefules from the internet can conta wuses Unless you need to edit safe to stay in Protected View Enable ding A19 Total H Name: Studen ID: Section No.1 Formula Unit Result D FIN220 Marking rubrics 2 301 4 Ratio Current Ratio 6 Quick Ratio Cash Ratio Total Asset Turnover Inventory Turnover 10 Receivables Turnover 11 Total Debt Ratio 12 Debt-Equity Ratio 13 Equity Multiplier 14 Times Interest Earned 15 Cash Coverage Ratio 10 Profit Martin 17 Return on Assets th Ieturn an Equity Point 1 1 1 1 1 Point 1 1 1 1 1 1 1 1 1 1 Point 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Total 14 14 14 42 pois 20 21 22 Q2 10 polr 26 > Q3 Solution Sheet Type here to search enovo Total Reference for comparing the attemy Point Short analysis Point Light Airplane Indy Banos 1 Love Lupe 1 el Ratio Resu Untevora Current Ratio Quick Rab Cash Ratio TO Ante Turnove hemory Tune Recewables Turnov 1 050 1 1 BO 105 004 1 1 1 1 Curen Rai Qack Rate Cho Tot Arpetu Inventor Tuner 2 0.08 4.89 12 Torslebt Ratio 1 6:27 111 0.01 Debt-Equio 3 Euty Muller Tmes heren End 1 Ch Coverage hala Megin Return on Anne 1 1 1 1 1 Recewables Tune Total De Rario Debi-Equay Ratio E Maple Tiesien Cash Cover RA Pole Megin 031 050 150 5.10 56 052 100 200 0.00 43 5152 256 3.00 1 4052 647/ 1 Beruin ona To Return on Aure Rannan 14 23 point M Deeper analysis on current and quick ratio 6 points Orwerpretation 10 points 14 Laculation LO 04 Formula Calculation Point Retention Ratio 4 4 4 Overall Interpretation Internal Growth 8 Sustainable Growth 9 0 * 1 272 73 74 3 Total 15 points Solution Sheet