Light Airplane Industry Ratios

Ratio Analysis at S&S Air, Inc.

Chris Guthrie was recently hired by S&S Air, Inc., to assist thecompany with its financial planning and to evaluate the company’sperformance. Chris graduated from college five yearsago with 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 MarkSexton and Todd Story. The company has manufactured andsold light airplanes over this period, and the company’s productshave received high reviews for safety and reliability. Thecompany has a niche market in that it sells primarily to individuals who own and fly their-own airplanes. The companyhas two models; the Birdie, which sells for $53,000, and theEagle, which sells for $78,000.

Although the company manufactures aircraft, its operationsare different from commercial aircraft companies. S&SAir builds aircraft to order. By using prefabricated parts, thecompany can complete the manufacture of an airplane in onlyfive weeks. The company also receives a deposit on each
order, as well as another partial payment before the order iscomplete. In contrast, a commercial airplane may take oneand one-half to two years to manufacture once the order isplaced.

Mark and Todd have provided the following financialstatements. Chris has gathered the industry ratios for the lightairplane manufacturing industry.

S&S Air INC.

2015 Income Statement

Sales $ 40,259,230
Cost of goods sold 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 retained earnings 1,419,766

S&S Air Inc

2014 Balance Sheet

Assets Liabilities & Equalities

Current assetsCurrent liabilities

Cash $ 456,435 Accounts payable $ 929,005

Accounts receivable 733,125 Notes payable 2,121,350
Inventory 1,037,180 Total current liabilities $ 3,050,355
Total current assets $ 2,262,740

Fixed assets Long-term debt $ 5,500,000

Net plant and equipment$17,723,430 Shareholders equity common stock $ 400,000
Retained earnings 11,035,815
Total Equity $ 11,435,815

Total assets $19,986,170Total liabilities and equity$19,986,170