1
Calculate Ratio as listed before!
a
Current Ratio
Current Assets
Current liability
2.168.520
2.919.000
0,74 times
b
Quick Ratio
Current Assets - Inventory
Current liability
h
(18.308.920 - 10.069.920)
10.069.920
0,82 times
i
(2.168.520 - 1.037.120)
2.919.000
0,39 times
c
Cash Ratio
Cash + Bank + Marketable securities
Current liability
Debt-equity ratio
Total Debt
Total Equity
Equity mulitiplier
Total Assets
Total Equity
18.308.920
10.069.920
1,82 times
j
Times interest earned
EBIT
Interest
441.000
2.919.000
0,15 times
d
Total Asset Turnover
Sales
Total Assets
3.040.660
478.240
6,36 times
k
30.449.420
18.308.920
1,66 times
e
Inventory Turnover
Sales
Inventory
30.449.420
1.037.120
29,36 times
Cash coverage ratio
EBIT + Depreciation
Interest
(3.040.660 + 1.366.680)
478.240
9,22 times
l
Profit margin
Net Income
Sales
1.537.452
30.449.420
5,05%
f
Receivable turnover
Sales
Account Receivable
m Return on Asset
Net Income
Total Assets
30.449.420
708.400
42,98 times
g
Total debt ratio
Total Debt
Total Assets
1.537.452
18.308.920
8,40%
n
Return on Equity
Net Income
Total Equity
(18.308.920 - 10.069.920)
18.308.920
0,45 times
2
1.537.452
10.069.920
15,27%
Compare the performance of S&S Air to the industry!
S&S 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 S&S Air. The company may have more predictable cash flows, or more
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 S&S Air has less
inventory to current liabilities than the industry median. S&S Air has less inventory
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 may mean that S&S Air is more
efficient than the industry.
The financial leverage ratios are all below the industry median, but above the
lower quartile. S&S Air generally has less debt than comparable companies, but still
within the normal range.
The profit margin for the company is lower than the industry median,he ROA and
ROE are both below the industry median, but above the lower quartile.
Overall, S&S Air’s performance seems good, although the liquidity ratios indicate
that a closer look may be needed in this area.
The profit margin for the company is lower than the industry median,he ROA and
ROE are both below the industry median, but above the lower quartile.
Overall, S&S Air’s performance seems good, although the liquidity ratios indicate
that a closer look may be needed in this area.
3
Internal growth rate
Internal growth rate = (ROA × b) / [1 – (ROA × b)]
b = 1 - (Dividend / Net Income)
dividend
net income
560.000
1.537.452
0,36
0,64
1 - (dividend / net income) =
b = 0,64
Internal growth rate = (0,084 x 0,64) / [1 - (0,084 x 0,64)]
Internal growth rate =
5,68%
Sustainable growth rate
Sustainable growth rate = (ROE × b) / [1 – (ROE × b)]
Sustainable growth rate = (0,153 x 0,64) / [1 - (0,0153 x 0,64)]
Sustainable growth rate =
10,85%
4
Pro forma financial statements for next year at a 12 percent growth rate are:
S&S AIR, INC
2011 Pro Forma Income Statement
($)
Sales
34.159.350
Cost of goods sold
24.891.530
Other expenses
4.331.600
1.366.680
Depreciation
EBIT
3.569.541
478.240
Interest
Taxable Income
3.091.301
1.236.520
Taxes (40%)
Net Income
1.854.780
Dividend
675.583
Add to retained Earning
1.179.197
EFN = Total assets - Total liabilities and equity
EFN = $20.505.990 - $19.594.797
EFN = $
911.193
Ratio
Current ratio
Quick ratio
Cash ratio
Total asset turnover
Good
Better at managing current accounts.
Better at managing current accounts.
Better at managing current accounts.
Better at utilizing assets.
Inventory turnover
Better at inventory management,
possibly due to better procedures.
Better at collecting receivables.
Receivables turnover
Total debt ratio
Less debt than industry median means
the company is less likely to experience
credit problems.
Debt-equity ratio
Less debt than industry median means
the company is less likely to experience
credit problems.
Equity multiplier
Less debt than industry median means
the company is less likely to experience
credit problems.
Times Interest Earned
Less debt than industry median means
the company is less likely to experience
credit problems.
Cash coverage
Less debt than industry median means
the company is less likely to experience
credit problems.
Profit margin
Company may be controlling costs better
than the industry or charging a higher
margin
ROA
Company is performing above many of its
peers.
Company is performing above many of its
peers.
ROE
S&S AIR, INC.
2011 Balance Sheet
Assets ($)
Current Assets
Cash
Account receivable
Inventory
Total current assets.
Fixed assets
Net plan and equipment
Total assets
441.000
708.400
1.037.120
2.186.520
16.122.400
18.308.920
========
The internal growth rate shows the maximum sales growth rate that can be supported
with no external financing by only relying on retained earnings as funding. The IGR can
indicate to companies how they can use their existing resources more efficiently and
effectively to generate internal growth. So, S&S Air can generate 5% growth rate with
no external financing
The sustainable growth rate is the growth rate the company can achieve by raising
outside debt based on its retained earnings and current capital structure. So, if S&S air
get external funding like credit from bank they can maximize the sales until 10,85%.
cent growth rate are:
S&S AIR, INC.
2011 Pro Forma Balance Sheet
Assets ($)
Current Assets
Cash
Account receivable
Inventory
Total current assets.
Fixed assets
Net plan and
equipment
Total assets
493.920
793.408
1.161.574
2.448.902
18.057.088
20.505.990
========
Bad
May be having liquidity problems.
May be having liquidity problems.
May be having liquidity problems.
Assets may be older and
depreciated, requiring extensive
investment
soon.
Could
be experiencing
inventory
shortages.
May have credit terms that are too
strict. Decreasing receivables
turnover may increase sales.
Increasing the amount of debt can
increase shareholder returns.
Especially notice that it will
increase
ROE.
Increasing
the amount of debt can
increase shareholder returns.
Especially notice that it will
increase ROE.
Increasing
the amount of debt can
increase shareholder returns.
Especially notice that it will
increase
ROE.
Increasing
the amount of debt can
increase shareholder returns.
Especially notice that it will
increase ROE.
Increasing the amount of debt can
increase shareholder returns.
Especially notice that it will
increase
Cost mayROE.
be too high
Assets may be old and depreciated
relative to industry.
Profit margin and EM could still be
increased, which would further
increase ROE.
S&S AIR, INC.
011 Balance Sheet
Liabilities and Equities ($)
Current liabilities
Account payable
Notes payable
Total current liabilities
Long-term debt
Shareholder equity
Common stock
Retained earning
Total Equity
Total liabilities and equity
889.000
2.030.000
2.919.000
5.320.000
350.000
9.719.920
10.069.920
18.308.920
========
S&S AIR, INC.
Pro Forma Balance Sheet
Liabilities and Equities ($)
Current liabilities
Account payable
Notes payable
Total current liabilities
Long-term debt
Shareholder equity
Common stock
Retained earning
Total Equity
Total liabilities and equity
995.680
2.030.000
3.025.680
5.320.000
350.000
10.899.117
11.249.117
19.594.797
========
S&S AIR, INC
2011 Income Statement
($)
Sales
Cost of goods sold
Other expenses
Depreciation
EBIT
Interest
Taxable Income
Taxes (40%)
Net Income
Dividend
Add to retained Earning
30.499.420
22.224.580
3.867.500
1.366.680
3.040.660
478.240
2.562.420
1.024.968
1.537.452
560.000
977.452