Analysis Of Boeing Company And Aerospace And Defence Industry Within Industrial Goods Sector

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Part Three: Analysis of Company Accounts Section 3.1 Introduction All three companies under analysis in this part of the report including Airbus Group, the Boeing Company and Lockheed Martin are operating in aerospace and defence industry within industrial goods sector. Financial performance of Boeing is assessed by analysing a series of ratios measuring the efficiency, liquidity, economic value added and profitability of the company accounts. For the reason that ratio may be of little meaning without a yardstick with which it was contrasted, recent performance is therefore compared with progressional results over a period of time using trend analysis. Moreover, cross-sectional analysis is employed to evaluate financial performances of…show more content…
Section 3.3 Efficiency Measures 3.3.1 Inventory turnover Inventory turnover ratio (ITR) measures how efficient a company is using its inventories to generate revenues. It considers the on-hand inventories of a company relative to that company’s sales of products. Sales of services are excluded from the calculations because the ratio is only relevant with the stock of physical goods. A higher ITR is typically preferred because it suggests that a given amount of inventory has been turned into more cash and profits. A decreasing trend of Boeing’s ITR can be spotted from Graph 3.1, from a historical ratio of 6.29 in 2006 to 1.73 in 2014. Graph 3.2 shows a comparison between Airbus and Boeing. ITR for Boeing has suffered continuous deterioration and settled within 1.7 to 1.9 in recent three fiscal years while Airbus manages to maintain around 2.4, and average ITR for aerospace and defence industry is 2.56 for the same time period. There are two factors affecting a company’s inventory turnover ratio, namely, stock purchasing and revenues generated from selling products. Inventory turnover ratios for Boeing company is calculated to be 1.89, 1.79, 1.73 for year 2012, 2013, 2014 respectively, and within the same time frame, sales revenue of the company increased with a growth rate of 7.8% in 2013 and 5.07% in 2014 (table 3.1). Therefore

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