Chris Guthrie was recently hired by S&S Air, Inc., to assetthe company with its financial planning and to evaluate thecompany's performance. Chris graduated from college five years agowith a finance degree. He has been employed in the financedepartment of a Fortune 500 company since then.

S&S Air was founded 10 years ago by friends Mark Sexton andTodd Story. The company has manufactured and sold light airplanesover this period, and the company's products have received highreviews for safety and reliability. The company has a niche marketin that is sells primarily to individuals who own and fly their ownairplanes. The company has two models: the Birdie, which sells for$103,000, and the Eagle, which sells for $178,000.

Although the company manufactures aircraft, its operations aredifferent from commercial aircraft companies. S&S Air buildsaircraft to order. By using prefabricated parts, the company cancomplete the manufacture of an airplane in only five weeks. Thecompany also receives a deposit on each order, as well as anotherpartial payment before the order is complete. In contast, acommercial airplane may take one and one-half to two years tomanufacture once the order is placed.

Mark and Todd have provided financial statements (which are tothe left and below). In addition, Chris has gathered the industryratios for the light airplance manufacturing industry (below).

	2019 Income Statement
	Sales		$    40,259,230
	COGS		29,336,446
	Other expenses		5,105,100
	Depreciation		1,804,220
	EBIT		$       4,013,464
	Interest		630,520
	Taxable income		$       3,382,944
	Taxes (40%)		1,353,178
	Net income		$       2,029,766
	Dividends		$          610,000
	Add to RE		$       1,419,766

		2019 Balance Sheet
		Assets				Liabilities & Equity
		Current Assets				Current Liabilities
		Cash		$          456,435		Accounts Payable	$          929,005
		Accounts rec.		733,125		Notes Payable	2,121,350
		Inventory		1,073,180		Total CL	$       3,050,355
		Total CA		$       2,262,740
						Long-term debt	$       5,500,000
						Shareholder Equity
		Fixed assets				Common stock	$          400,000
		Net PP&E		$    17,723,430		Retained earnings	11,035,815
						Total Equity	$     11,435,815
		Total Assets		$    19,986,170		Total L&E	$     19,986,170

		Industry
		Lower Quartile	Median	Upper Quartile
Current ratio		0.50	1.43	1.89
Quick ratio		0.21	0.35	0.62
Cash ratio		0.08	0.21	0.39
Total asset turnover		0.68	0.85	1.38
Inventory turnover		4.89	6.15	10.89
Receivables turnover		6.27	9.82	14.11
Total debt ratio		0.44	0.52	0.61
Debt-equity ratio		0.68	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%

Questions:

1. Using the financial statements provided above, calculate eachof the ratios listed in the industry table for S&S Air (all 14of them).

2. Mark and Todd agree a ratio analysis can provide a measure ofthe company's performance. They have chosen Boeing as an aspirant(comparison) company. Would you choose Boeing as an aspirantcompany? Why or why not? There are other aircraft manufacturersS&S Air could use as aspirant companies. Discuss whether it isappropriate to use any of the following companies: Bombadier,Embraer, Cirrus Aircraft Corporation, and Cessna AircraftCompany.

3. Compare the performance of S&S Air to the industry, usingthe 14 ratios you calculated in part 1 and the industry tableprovided. For each ratio, comment on whether it would be viewed aspositive or negative (favorable or unfavorable) to the industry andwhy.