FINANCE FOR MANAGERS WEEKS 2

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FINANCE FOR MANAGERS

WEEK 2

Start by reading and following these instructions:

1. Quickly skim the questions or assignment below and the assignment rubric to help you focus.

2. Read the required chapter(s) of the textbook and any additional recommended resources. Some answers may require you to do additional research on the Internet or in other reference sources. Choose your sources carefully.

3. Consider the discussion and the any insights you gained from it.

4. Create your Assignment submission and be sure to cite your sources, use APA style as required, check your spelling.

Assignment:

Answer these essay questions:

1.  Go to the website www.sec.gov and find the filings for General Electric (GE). What is the date of the oldest 10-K available on the website for GE. 10-K is the annual report filed with the SEC. Look up the 10-K forms for IBM & Apple and compare the dates of first electronic filing with that of GE. Find out when the following forms are used: Form DEF-14A, Form 8-K, and Form 6-K. Why should investors know about these reports? What is a 10-Q report?

2.  Visit Alcoa at www.alcoa.com . Find the most recent annual report and locate the balance sheets for the last two years. Use these balance sheets to calculate the change in networking capital. How do you interpret this number?

3.  Chris Guthrie was recently hired by S&S Air, Inc., to assist the company with its financial planning, and to evaluate the company's performance. Chris graduated from college five years ago with a finance degree. He has been employed in the finance department of a Fortune 500 company since then. Friends Mark Sexton and Todd Story founded S&S Air 10 years ago. The company has manufactured and sold light airplanes over this period, and the company's products have received high reviews for safety and reliability. The company has a niche market in that it sells primarily to individuals who own and fly their own airplanes. The company has two models, the Birdie, which sells for $53,000, and the Eagle, which sells for $78,000. While the company manufactures aircraft, its operations are different from commercial aircraft companies. S&S Air builds aircraft to order. By using prefabricated parts, the company is able to complete the manufacture of an airplane in only five weeks. The company also receives a deposit on each order, as well as another partial payment before the order is complete. In contrast, a commercial airplane may take 18 months - two years to manufacture once the order is placed. Mark and Todd have provided the following financial statements. Chris has gathered the industry ratios for the light airplane manufacturing industry.

SAS Air, Inc.

2014 Income Statement

Sales

$24,092,400

Sales Cost of goods sold

17,982,000

Other expenses

2,878,800

Depreciation

786,000

EBIT

$ 2,445,600

Interest

434,400

Taxable income

$ 2,011,200

Taxes (40%)

804,480

Net income

$ 1,206,720

Dividends

$246,000

Add. to retained earnings

$960,720

SAS Air, Inc. 2014 Balance Sheet

Assets

Liabilities & Equity

Current assets

Current liabilities

Cash

$ 438,048

Accounts payable

$ 858,816

Accounts receivable

1,841,616

Notes payable

1,735,680

Inventory

1,486,200

Total current liabilities

$ 2,594,496

Total current assets

$ 3,765,864

Long-term debt

$ 4,590,000

Fixed assets

Shareholder equity

Net plant and equipment

$14,778,816

Common stock

$ 180,000

Retained earnings

$11,180,184

Total equity

$11,360,184

Total assets

$18,544,680

Total liabilities & equity

$18,544,680

Light Airplane Industry Ratios

Lower Quartile

Median

Upper Quartile

Current ratio

0.50

1.43

1.89

Quick ratio

0.64

0.84

1.05

Cash ratio

0.08

0.21

0.39

Total asset turnover

0.68

0.85

1.28

Inventory turnover

4.89

6.15

10.89

Receivables turnover

6.27

9.82

11.51

Total debt ratio

0.31

0.52

0.61

Debt-equity ratio

0.58

1.08

1.56

Equity multiplier

1.58

2.08

2.56

Times interest earned

5.18

8.06

9.83

Cash coverage ratio

5.84

8.43

10.27

Profit margin

4.05%

5.15%

6.47%

Return on assets

6.05%

10.53%

13.21%

Return on equity

9.93%

16.54%

26.15%

 QUESTIONS:

a. Calculate the ratios for S&S Air that are shown for the industry.

b. 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?

c. Compare the performance of S&S 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 by inventory divided by current liabilities. How do you think S&S Air's ratio would compare to the industry average?

d. Calculate the internal growth rate and sustainable growth rate for S&S Air. What do these numbers mean?

4. Cooper Tire and Rubber Company provides financial information for investors on its website at www.coopertires.com. Follow the “Investors” link and find the most recent annual report. Using the consolidated statements of cash flows, calculate the cash flow to stockholders and the cash flow to creditors, and use this data as you write your report.

    • Posted: 11 days ago
    • Due: 
    • Budget: $40