- Using the financial statements provided for S&S Air, calculate each of the ratios listed in the table above for the light aircraft industry.
- 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.
AutoSave O on A 2. ) $ - P Search Extra 1 Ratio Irfan Butt A Share Design Mailings P Comments File References Review View Help Picture Format Home Insert Draw Layout 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 $46,298,115 Sales Cost of goods sold 34,536,913 5,870,865 Other expenses Depreciation 2.074.853 EBIT $ 3,815,484 Interest 725.098 Taxable income $ 3,090,386 Taxes (25%) 772.597 $ 2,317,789 Net income S 705,000 Dividends Add to retained earnings 1,612,789 D Focus Page 1 of 2 418 words 109% 1:01 PM P Start a search 1/29/2020 P Search AutoSave O on Extra 1 Ratio Irfan Butt Table Design A Share P Comments Design References Mailings File Review View Help Layout Home Insert Draw Layout S&S AIR, INC. 2018 Balance Sheet Liabilities and Equity Assets Current assets Current liabilties $ 524,963 $ 1,068,356 Cash Accounts payable Notes payable Accounts receivable 843,094 2,439,553 $ 3,507,909 Total current liabilities Inventory 1,235,161 $ 2,603.218 Total current assets $ 6,300,000 Long-term debt Fixed assets Shareholder equity Net plant and equipment $20,381,945 Common stock 2$ 460,000 Retained earnings 12.717.254 $ 13,177,254 Total equity $ 22,985,163 Total liabilities and equity Total assets $22,985,163 Light Airplane Industry Ratios D Focus Page 2 of 2 418 words 158% 1:03 PM P Start a search 1/29/2020 P Search AutoSave O on Extra 1 Ratio Irfan Butt Mailings Table Design A Share P Comments File Design References Review View Help Home Insert Draw Layout Layout Common stock 460,000 Retained earnings 12,717,254 $ 13,177,254 Total equity $ 22,985,163 Total liabilities and equity $22,985,163 Total assets Light Airplane Industry Ratios Lower Upper Quartile Quartile Median Current ratio .50 1.18 1.89 Quick ratio .21 .55 .82 Cash ratio .09 .28 .39 Total asset turnover .68 1.09 1.38 4.89 Inventory turnover Receivables turnover 8.15 11.89 6.27 10.82 14.11 Total debt ratio .44 .52 .61 Debt-equity ratio Equity multiplier .68 1.18 1.56 1.68 2.28 3.56 4.05% Profit margin 5.90% 7.15% 16.21% Return on assets 6.05% 12.53% Return on equity 9.93% 17.14% 26.15% O Focus Page 2 of 2 418 words 158% 1:03 PM P Start a search 1/29/2020
