S&S Air Essay

Words: 1006
Pages: 5

Q2.) 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? There are other aircraft manufacturers S&S Air could use as aspirant companies. Discuss whether it is appropriate to use any of the following companies: Bombardier, Embracer, Cirrus Design Corporation, and Cessna Aircraft Company.

It is not appropriate for S&S to use Boeing as an aspirant company for its ratio analysis, for a number of reasons. First the size difference between the companies is far too great. For firms' ratios to be comparable, they should be at least approximately the same size. Another reason is that Boeing's
…show more content…
Return on assets 8.40% 10.53% Negative Determines the extent of returns that is generated
For every unit of total asset employed by the firm
Return on equity 439% 16.54% Positive Determines the extent of returns on equity injected by the Owners.
Alternative Inventory 0.36 6.15 Negative This ratio is intended to measure the amount, of inventory, that is financed by debt.
Q3.) 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. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How do you think S&S Air’s ratio would compare to the industry average?

S&S is below the median industry ratios for the current and cash ratios. This implies the company has less liquidity than the industry in general. However, both ratios are above the lower quartile, so there are companies in the industry with lower liquidity ratios than S&S Air. The Company may have more predictable cash flows or access to short-term borrowing. The Current Ratio is below the industry median, while the quick ratio is above the industry median. This implies that S&S has fewer inventories to current liabilities than the industry median. S&S has fewer inventories than the industry median, but more accounts receivable than the industry since the cash ratio is lower than the industry median. The turnover ratios are