SS Air free essay sample

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 SS 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 SS 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 Boeings operations are dramatically different. They have a wide range of businesses, including aeronautics and defense, not just the manufacture of commercial aircraft. We will write a custom essay sample on SS Air or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page This indicates that the target market for the two companies is also dramatically different. Defense spending and the global airline industry are two key drivers for Boeing, for SS the drivers are more related to demand for recreational aircraft.The revenue profiles, of both companies, would be different. Apart from the revenue profile other variables like aircraft manufacture time, revenue collection, interest payments etc may be different. Any comparison, between the two companies, would yield incomparable results. To find a good comparable firm for SS, the firm must be engaged in a roughly similar industry, with the same market. Therefore, it would not be advisable that SS Air use Boeing as an aspirant company. The four companies mentioned above, all manufacture for a position of the market.Profit margin5%6. 98%NegativeMeasures return on sales after all expenses have been deducted. Return on assets8. 40%10. 53%NegativeDetermines the extent of returns that is generated For every unit of total asset employed by the firm Return on equity439%16. 54%PositiveDetermines the extent of returns on equity injected by the Owners. Alternative Inventory 0. 366. 15NegativeThis ratio is intended to measure the amount, of inventory, that is financed by debt. Q3. ) Compare the performance of SS 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 SS Air’s ratio would compare to the industry average? SS 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 SS 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 SS has fewer inventories to current liabilities than the industry median. SS 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 all higher than the industry median; in fact all three turnover ratios are above the upper quartile. This might indicate that SS Air is more efficient than the industry. The financial leverage ratios are all below the industry median, but above the lower quartile, which means that SS Air generally has less debt than comparable, companies but still within the normal range.The profit margin for the company is about the same as the industry median, the Return on asset is slightly higher than industry median, and the Return on equity is well above the industry median, which means that SS seem to be performing well in the profitability area. If you created an inventory to current liabilities ratio, SS Air would have a ratio that is lower than the industry median. Overall, SS Air’s performance seems good, a lthough the liquidity ratios indicate that a closer look maybe needed in this area.