Jessica Lee has been hired by J&J Industries to assist in financial planning and company performance...

 

Transcribed Image Text:

Jessica Lee has been hired by J&J Industries to assist in financial planning and company performance evaluation. She graduated five years ago with a degree in finance and has been working in the finance department of a Fortune 500 company since then. J&J Industries was founded by friends Eric Johnson and Tyler Jameson ten years ago. The company has produced and sold light aircraft over this time and has received high safety and reliability ratings. The company has a niche market, selling primarily to individuals who own and fly their own aircraft. J&J Industries has two models: the Phoenix, priced at $53,000, and the Falcon, priced at $78,000. Although the company manufactures aircraft, its operations differ from commercial aircraft companies. J&J Industries builds aircraft to order and, by using prefabricated parts, can complete the manufacture of an aircraft in just five weeks. The company also receives a deposit and partial payment before the order is complete. In contrast, a commercial aircraft may take one and a half to two years to manufacture once an order is placed. Eric and Tyler have provided financial statements, and Jessica has gathered industry ratios for the light aircraft manufacturing industry. Sales Cost of goods sold Other expenses Depreciation - EBIT Interest Taxable income Taxes (21%) Net income J&J Industries Income Statement December 31,2022 Dividends Additions to retained earnings $29,151,760 21,758,220 3,483,370 952,300 $2,957,870 $28,170 $2,429,700 510,237 $1,919.463 $ 297,660 $1,621,803 Also the following balance sheet information is shared with you: Cash Accounts payable Accounts receivable Notes payable Inventory Long-term debt Net plant and equipment Common stock Retained earnings Current ratio Quick ratio Cash ratio Total asset turnover Inventory turnover Receivables turnover Total debt ratio Debt-equity ratio Equity multiplier Times interest earned Cash coverage ratio Profit margin Return on assets Return on equity QUESTIONS Light Airplane Industry Ratios Median Lower Quartile 50 64 08 68 4.89 6.27 31 58 1.58 5.18 5.84 de VO 4.05% 6.05% 9.93% 1.43 84 21 85 6.15 9.82 52 1.08 2.08 8.06 8:43 6.75% 10.53% 16.54% $530,037 51.039.168 2,228,356 2,100,173 1,798,302 $5,570,000 $17,882,368 $210,000 13,519,722 Upper Quartile 1.89 1.05 39 1.13 10.89 11.51 61 1.56 2.56 9.83 10.27 8.47% 13.21% 26.15% 1- Can you please calculate the ratios for J&J Air that are prevalent in the industry? 2- Eric and Jameson agree that analyzing ratios can measure company performance. They selected Airbus as an aspirant. Do you agree? Why or why not? 3- Compare J&J Air's performance to that of the industry. For every ratio, provide your comments on why it could be regarded as positive or negative when compared to the industry. If you were to create an inventory ratio that's calculated by dividing inventory by current liabilities, how do you think J&J Air's ratio would compare to the industry average? 4- Calculate both the internal growth rate and sustainable growth rate for J&J Air and explain what these numbers mean. Jessica Lee has been hired by J&J Industries to assist in financial planning and company performance evaluation. She graduated five years ago with a degree in finance and has been working in the finance department of a Fortune 500 company since then. J&J Industries was founded by friends Eric Johnson and Tyler Jameson ten years ago. The company has produced and sold light aircraft over this time and has received high safety and reliability ratings. The company has a niche market, selling primarily to individuals who own and fly their own aircraft. J&J Industries has two models: the Phoenix, priced at $53,000, and the Falcon, priced at $78,000. Although the company manufactures aircraft, its operations differ from commercial aircraft companies. J&J Industries builds aircraft to order and, by using prefabricated parts, can complete the manufacture of an aircraft in just five weeks. The company also receives a deposit and partial payment before the order is complete. In contrast, a commercial aircraft may take one and a half to two years to manufacture once an order is placed. Eric and Tyler have provided financial statements, and Jessica has gathered industry ratios for the light aircraft manufacturing industry. Sales Cost of goods sold Other expenses Depreciation - EBIT Interest Taxable income Taxes (21%) Net income J&J Industries Income Statement December 31,2022 Dividends Additions to retained earnings $29,151,760 21,758,220 3,483,370 952,300 $2,957,870 $28,170 $2,429,700 510,237 $1,919.463 $ 297,660 $1,621,803 Also the following balance sheet information is shared with you: Cash Accounts payable Accounts receivable Notes payable Inventory Long-term debt Net plant and equipment Common stock Retained earnings Current ratio Quick ratio Cash ratio Total asset turnover Inventory turnover Receivables turnover Total debt ratio Debt-equity ratio Equity multiplier Times interest earned Cash coverage ratio Profit margin Return on assets Return on equity QUESTIONS Light Airplane Industry Ratios Median Lower Quartile 50 64 08 68 4.89 6.27 31 58 1.58 5.18 5.84 de VO 4.05% 6.05% 9.93% 1.43 84 21 85 6.15 9.82 52 1.08 2.08 8.06 8:43 6.75% 10.53% 16.54% $530,037 51.039.168 2,228,356 2,100,173 1,798,302 $5,570,000 $17,882,368 $210,000 13,519,722 Upper Quartile 1.89 1.05 39 1.13 10.89 11.51 61 1.56 2.56 9.83 10.27 8.47% 13.21% 26.15% 1- Can you please calculate the ratios for J&J Air that are prevalent in the industry? 2- Eric and Jameson agree that analyzing ratios can measure company performance. They selected Airbus as an aspirant. Do you agree? Why or why not? 3- Compare J&J Air's performance to that of the industry. For every ratio, provide your comments on why it could be regarded as positive or negative when compared to the industry. If you were to create an inventory ratio that's calculated by dividing inventory by current liabilities, how do you think J&J Air's ratio would compare to the industry average? 4- Calculate both the internal growth rate and sustainable growth rate for J&J Air and explain what these numbers mean.