Tools Window Help Extra 1 Ratio.pdf (page 1 of 2) Ratio Analysis at S&S Air, Inc. Tom Smith was recently hired by S&S Air, Inc., to assist the company with its financial planning and to evaluate the company's performance. Tom 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 $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 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 one-half to two years to manufacture once the order is placed. Mark and Todd have provided the following financial statements. Tom has gathered the industry ratios for the light airplane manufacturing industry. S&S AIR, INC. 2018 Income Statement Sales Cost of goods sold Other expenses Depreciation EBIT S46,298,115 34.536.913 5.870,865 _2.074.853 $ 3.815,484 725.098 $ 3,090,386 772.597 S 2.317.789 Interest Taxable income Taxes (25) Net income Dividends $ 705,000 1,612,789 Add to retained earnings S&S AIR, INC. 2018 Balance Sheet Liabilities and Equity Curs Cach Current liabilities Accounts payable Notes payable Accounts receivable 5 524.963 S43.094 1.235.161 5.2.603.218 $ 1.068.356 -2439.553 3.507.909 ventory Total current liabilities Total current assets Long-term debt 5.6.300.000 Fixed assets Net plant and equipment $20.381.945 Shareholder equity Common stock Retained earnings $ 460,000 12.217.254 $ 13.127.254 $ 22,085,163 Total equity Total liabilities and equity Total assets $22.985,163 Upper Quartile 1.89 50 Light Airplane Industry Ratios Lower Quartile Median Current ratio 1.18 Quick ratio .55 Cash ratio .28 Total asset turnover 1.09 Inventory turnover 8.15 Receivables turnover 10.82 Total debt ratio Debt-equity ratio 1.18 Equity multiplier 1.68 2.28 .39 1.38 11.89 14.11 .61 .32 3.56 Profit margin Return on assets Return on equity 4.05% 6.05% 9.93% 5.90% 12.53% 17.14% 7.15% 16.21% 26.15% ESTIONS QUESTIONS 1. Using the financial statements provided for S&S Air, calculate each of the ratios listed in the table above for the light aircraft industry 2. 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.
