2. The income statement and balance sheet of S&S Air, and the industry median financial ratios...

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2. The income statement and balance sheet of S&S Air, and the industry median financial ratios are shown below (page 2): a) Using the financial statements provided for S&S Air, calculate each of the ratios listed in the table for the light aircraft industry (current ratio, quick ratio,, return on equity) b) 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. c) S&S Air is planning for a growth rate of 12 percent next year. Calculate the EFN for the company assuming the company is operating at full capacity. Can the company's sales increase at this growth rate? Sales Cost of goods sold Other expenses Depreciation EBIT Interest Taxable income Taxes (40%) Net income Dividends 1/2 S&S AIR, INC. 2017 Income Statement $46,298,115 33,736,913 5,870,865 2,074,853 $ 4,615,484 725,098 $ 3,890,386 1,556,154 $ 2,334,232 $ 705,000 Add to retained earnings 1,629,232 S&S AIR, INC. 2017 Balance Sheet Assets Current assets Cash Accounts receivable Inventory Total current assets $ 524,963 843,094 1,235,161 $ 2,603,218 Current liabilities Accounts payable Notes payable Total current liabilities Long-term debt Liabilities and Equity $ 1,068,356 2,439,553 $ 3,507,909 $6,300,000 Fixed assets Net plant and equipment $20,381,945 Shareholder equity Common stock $ 460,000 Retained earnings Total equity 12,717,254 $13,177,254 Total assets $22,985,163 Total liabilities and equity $22,985,163 Light Airplane Industry Ratios Lower Quartile Median Upper Quartile Current ratio .50 1.43 1.89 Quick ratio .21 .35 .62 Cash ratio .08 .21 .39 Total asset turnover .68 .85 1.38 Inventory turnover 4.89 6.15 10.89 Receivables turnover 6.27 9.82 14.11 Total debt ratio .44 .52 .61 Debt-equity ratio .68 1.08 1.56 Equity multiplier 1.68 2.08 2.56 Times interest earned 5.18 8.06 9.83 Cash coverage ratio 5.84 9.41 10.27 Profit margin 4.05% 5.10% 7.15% Return on assets 6.05% 10.53% 13.21% Return on equity 9.93% 18.14% 26.15% 2/2 2. The income statement and balance sheet of S&S Air, and the industry median financial ratios are shown below (page 2): a) Using the financial statements provided for S&S Air, calculate each of the ratios listed in the table for the light aircraft industry (current ratio, quick ratio,, return on equity) b) 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. c) S&S Air is planning for a growth rate of 12 percent next year. Calculate the EFN for the company assuming the company is operating at full capacity. Can the company's sales increase at this growth rate? Sales Cost of goods sold Other expenses Depreciation EBIT Interest Taxable income Taxes (40%) Net income Dividends 1/2 S&S AIR, INC. 2017 Income Statement $46,298,115 33,736,913 5,870,865 2,074,853 $ 4,615,484 725,098 $ 3,890,386 1,556,154 $ 2,334,232 $ 705,000 Add to retained earnings 1,629,232 S&S AIR, INC. 2017 Balance Sheet Assets Current assets Cash Accounts receivable Inventory Total current assets $ 524,963 843,094 1,235,161 $ 2,603,218 Current liabilities Accounts payable Notes payable Total current liabilities Long-term debt Liabilities and Equity $ 1,068,356 2,439,553 $ 3,507,909 $6,300,000 Fixed assets Net plant and equipment $20,381,945 Shareholder equity Common stock $ 460,000 Retained earnings Total equity 12,717,254 $13,177,254 Total assets $22,985,163 Total liabilities and equity $22,985,163 Light Airplane Industry Ratios Lower Quartile Median Upper Quartile Current ratio .50 1.43 1.89 Quick ratio .21 .35 .62 Cash ratio .08 .21 .39 Total asset turnover .68 .85 1.38 Inventory turnover 4.89 6.15 10.89 Receivables turnover 6.27 9.82 14.11 Total debt ratio .44 .52 .61 Debt-equity ratio .68 1.08 1.56 Equity multiplier 1.68 2.08 2.56 Times interest earned 5.18 8.06 9.83 Cash coverage ratio 5.84 9.41 10.27 Profit margin 4.05% 5.10% 7.15% Return on assets 6.05% 10.53% 13.21% Return on equity 9.93% 18.14% 26.15% 2/2