Case Study: S&S Air Inc. Essay

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Case Study: S&S Air Inc. Founders of S&S Air, Inc. Mark Sexton and Todd Story recently hired Chris Guthrie to come on board as their financial planner. His job entailed gaining valuable information as to compare how their company was fairing with competing companies in the aircraft manufacturing industry. Through his research, Guthrie calculated many ratios through the careful examination of S&S Air’s balance sheet and income statement for the year ended 2009. With all of his research, Guthrie will be able to show the information he gathered to the board at S&S Air Inc. which in turn will help them make informed decisions based on the company’s valuation. When Guthrie…show more content…
This total asset turnover ratio is more useful for growth companies to check if in fact they are growing revenue in proportion to sales. In S&S Air Inc., their total asset turnover is slightly higher at 1.30 than the upper quartile of comparisons in the industry of 1.28. Their high total asset turnover is mostly in part due to their short manufacturing period of only five weeks, compared to their competitors of one and one-half to two years. The S&S Air Inc. receivables turnover ratio is 13.08 compared to the industry comparison upper quartile of 11.51, and is an activity ratio that measuring how efficiently a firm uses its assets. The calculation for the company’s turnover ratio suggests that they are manufacturing and selling their products very quickly, therefore need to be replaced equally as fast. Total debt ratio for the company is measured at .69, only slightly higher than the upper quartile of .61. This is a ratio that indicates what proportion of debt a company has relative to its assets and gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load. Creditors will pay careful attention to a company’s debt ratio when deciding to lend credit to the firm. The company’s debt-equity ratio indicates what proportion of equity and debt the company is using to finance its assets. In S&S’s case, they have a .23 debt-equity ratio, which is about half of what the
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