Ratio Anlysis Ar S&S Air Inc
CASE STUDY: RATIOS AND FINANCIAL PLANNING AT S&S AIR
1. The calculations for the ratios listed are: Current ratio = $3,138,220 / $2,162,080 Current ratio = 1.45 times Quick ratio = ($3,138,220 – 1,238,500) / $2,162,080 Quick ratio = 0.88 times Cash ratio = $365,040 / $2,162,080 Cash ratio = 0.17 times Total asset turnover = $20,077,000 / $15,453,900 Total asset turnover = 1.30 times Inventory turnover = $14,985,000 / $1,238,500 Inventory turnover = 12.10 times Receivables turnover = $20,077,000 / $1,534,680 Receivables turnover = 13.08 times Total debt ratio = ($15,453,900 – 9,466,820) / $15,453,900 Total debt ratio = 0.39 times Debt-equity ratio = ($2,162,080 + 3,825,000) / $9,466,820 Debt-equity ratio = 0.63 times Equity multiplier = $15,453,900 / $9,466,820 Equity multiplier = 1.63 times Times interest earned = $2,038,000 / $362,000 Times interest earned = 5.63 times Cash coverage = ($2,038,000 + 655,000) / $362,000 Cash coverage = 7.44 times Profit margin = $1,005,600 / $20,077,000 Profit margin = 0.0501 or 5.01% Return on assets = $1,005,600 / 15,453,900 Return on assets = 0.0651 or 6.51% Return on equity = $1,005,600 / $9,466,820 Return on equity = 0.1062 or 10.62%
2. Boeing is probably not a good aspirant company. Even though both companies manufacture airplanes, S&S Air manufactures small airplanes, while Boeing manufactures large, commercial aircraft. These are two different markets. Additionally, Boeing is heavily involved in the defense industry, as well as Boeing Capital, which finances airplanes. . S&S is above the median industry ratios for the current and cash ratios. This implies the company has more liquidity than the industry in general. However, both ratios are above the 3rd quartile, so there are companies in the industry with higher liquidity ratios than S&S Air. The
1. The calculations for the ratios listed are: Current ratio = $3,138,220 / $2,162,080 Current ratio = 1.45 times Quick ratio = ($3,138,220 – 1,238,500) / $2,162,080 Quick ratio = 0.88 times Cash ratio = $365,040 / $2,162,080 Cash ratio = 0.17 times Total asset turnover = $20,077,000 / $15,453,900 Total asset turnover = 1.30 times Inventory turnover = $14,985,000 / $1,238,500 Inventory turnover = 12.10 times Receivables turnover = $20,077,000 / $1,534,680 Receivables turnover = 13.08 times Total debt ratio = ($15,453,900 – 9,466,820) / $15,453,900 Total debt ratio = 0.39 times Debt-equity ratio = ($2,162,080 + 3,825,000) / $9,466,820 Debt-equity ratio = 0.63 times Equity multiplier = $15,453,900 / $9,466,820 Equity multiplier = 1.63 times Times interest earned = $2,038,000 / $362,000 Times interest earned = 5.63 times Cash coverage = ($2,038,000 + 655,000) / $362,000 Cash coverage = 7.44 times Profit margin = $1,005,600 / $20,077,000 Profit margin = 0.0501 or 5.01% Return on assets = $1,005,600 / 15,453,900 Return on assets = 0.0651 or 6.51% Return on equity = $1,005,600 / $9,466,820 Return on equity = 0.1062 or 10.62%
2. Boeing is probably not a good aspirant company. Even though both companies manufacture airplanes, S&S Air manufactures small airplanes, while Boeing manufactures large, commercial aircraft. These are two different markets. Additionally, Boeing is heavily involved in the defense industry, as well as Boeing Capital, which finances airplanes. . S&S is above the median industry ratios for the current and cash ratios. This implies the company has more liquidity than the industry in general. However, both ratios are above the 3rd quartile, so there are companies in the industry with higher liquidity ratios than S&S Air. The