S&S Air Case Study

S&S Air, Inc.
2009 Income Statement
Sales
COGS
Other Expenses
Depreciation
EBIT
Interest
Taxable Income
Taxes (40%)
Net Income

$20,077,000
$14,985,000.00
$2,399,000.00
$655,000.00
$2,038,000.00
$362,000.00
$1,676,000.00
$670,400.00
$1,005,600.00

Dividends
Add. To RE

$205,000.00
$800,600.00

2009 Balance Sheet
Current Assets
Cash
AR
Inventory
Total CA
Fixed Assets
Net P&E
Total Assets

1. Ratios
Current Ratio
Quick Ratio

Current Liabilities
$365,040
$1,534,680
$1,238,500
$3,138,220

AP
Notes Payable
Total CL
LT Debt
Shareholder Equity
Common Stock
Retained Earnings
Total Equity
Total Liabilities & equity

$12,315,680
$15,453,900

Formula
CA/CL
(CA-Inv)/CL

Answer
1.4515 times
0.8787 times

$715,680
$1,446,400
$2,162,080
$3,825,000
$150,000
$9,316,820
$9,466,820
$15,453,900

Cash Ratio
Total Asset Turnover
Inventory Turnover
Rec Turnover
Total Debt Ratio
Debt-Equity Ratio
Times Interest Earned
Cash Coverage
Profit Margin
Return on Assets
Return on Equity

Cash/CL
Sales/TA
COGS/Inv
Sales/AR
(TA-TE)/TA
TD/TE
EBIT/Interest
(EBIT+Depr)/Int
NI/Sales
NI/TA
NI/TE

0.1688
1.2992
12.0993
13.0822
0.3874
0.6324
5.6298
7.4392
0.0501
0.0651
0.1062

2. Boeing would not be a good aspirant company.
Both companies do manufacture airplanes but
S&S focuses mainly on smaller airplanes while
Boeing manufacturers large planes. The market would be different and would be tough for S&S to follow in Boeing's footsteps.
3.

4. Internal Growth Rate and Sustainable Growth Rate
IGR= (ROA x b)/ [1 - (ROA x b)]
ROA= NI/TA b=Add to RE/NI
IGR
Sustaninable Growth Rate

0.0651 6.51%
0.7961
0.0546 5.46%

times times times times times times times times 5.01%
6.51%
10.62%

SGR= (ROE x b) / (1 - ROE x b)
ROE=NI/TE
SGR

0.1062
0.0924

10.62%
9.24%

The IGR is the growth rate the company will achieve without any outside financing. The SGR is the growth rate the company can achieve by raising debt based off RE.