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Comparing the S&S Air Inc. performance with Cirrus Aircraft - Case Study Example

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This is because the operations between the two companies are totally different. For instance, Boeing Company produces commercial aircrafts while S&S Air Inc. are mainly private aircrafts…
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Comparing the S&S Air Inc. performance with Cirrus Aircraft
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Question one Current ratio=Current assets/current liabilities; 2,262,740/3,050,335=0.74 Quick ratio= (cash + account receivable)/ current liabilities; (456,435+733,125)/ 3,050,335=0.39
Cash ratio= cash and cash equivalent/current liabilities; 456,435/3,050,335= 0.15
Total asset turnover= Net sales revenue/ total asset; 40,259,230/19,986,170=2.01
Inventory turnover=Cost of goods sold/Average inventory; 29,336,230/1,073,180=27.3
Total debt ratio=Total liabilities/total assets; 8,550,355/19,986,170=0.43
Debt-equity=Total debt/Total equity; 8,550,355/11,435,615=0.75
Equity multiplier=Total asset/Total equity; 19,986,170/11,435,615=1.75
Times interest earned=EBIT/Interest expense; 4,013,464/630,620=6.4
Cash coverage ratio=EBIT + Depreciation/Interest expense; (4,013,464 + 1,804,220)/630,620=9.2
Profit margin=Net income/Net sales; (2,029,766/40,259,230)*100=5%
Return on assets=Net income/Total assets; (2,029,766/19,986,170)*100=10.2%
Return on equity=Net income/Total shareholders; (2,029,766/11,435,815)*100=17.8%
Question two
No, It be would not be right to pick Boeing as an aspirant company. This is because the operations between the two companies are totally different. For instance, Boeing Company produces commercial aircrafts while S&S Air Inc. are mainly private aircrafts. In addition to that lead time for Boeing is almost two years while that for S&S Air Inc. is only five weeks because it uses prefabricated parts while Boeing build an aircraft from scratch.
Comparing the S&S Air Inc. performance with Cirrus Aircraft would be significant because the operations between these two firms are similar and the period of existence between them is not to wide, Cessna Aircraft was founded in 1984 while S&S Air Inc. was founded 2005
Question three
Current ratio= 0.74
The current ratio for S&s Air is 0.74 which means it has less liquid asset to repay is current obligation, because its ratio is on lower quartile range in the light airplane industry. Negative review
Quick ratio=39
Quick ratio is considerable good because it operates on the median range in the light airplane industry, thus positive review in the industry.
Cash ratio=0.15
The ratio is close to 0.21 median ratio of the industry, thus the firm has a positive review on its cash ratio
Total asset turnover= 2.01
It makes sales worth two times the value of its total asset, thus the firm operates on the upper quartile range in the industry. Positive review.
Inventory turnover=27.3
The turnover of cost of goods is 27.3 times the value of inventory. This a best ratio, thus a positive review.
Total debt ratio=0.43
It has the lower ratio, thus meaning shareholders finance much of the asset. Positive review.
Debt-equity=0.75
The ratio is almost at the lower level within this industry. Therefore, Equity has high value than liabilities. Positive review.
Equity multiplier=1.75
The ratio is close to 1.68 ratio that represents the desirable ratio for equity multiplier. Positive review.
Times interest earned=6.4
The ratio is close to 8.06 ratio, a moderate ratio of Times interest earned in light airplane industry, thus a positive review
Cash coverage ratio=9.2
The ratio indicates that S&S Air Inc. can pay its interests expenses and remain with enough cash to pay other expenses. The ratio is close to 10.27 which is the best ratio. Positive review.
Profit margin=5%
The margin is close to 5.1%, a moderate margin in the light airplanes industry. Positive review.
Return on assets=10.2%
The return is close to 10.53%, a moderate return on asset in the light airplanes industry. Positive review
Return on equity=17.8%
The return is close to 18.14%, a moderate return on equity in the light airplanes industry. Positive review
Inventory/current liabilities
1,073,180/3,050,335=0.35.
This indicates that S&S Air Inc. inventory is worth 35% of the current liabilities. This is a moderate ratio thus a positive review when it is compared the current liabilities.
Reference
Diamond, Michael A., and Earl K. Stice. Financial Accounting. 5th ed. Cincinnati, OH: Southwestern College Pub., 2000. Print. Read More
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