Register to read the introduction…
This is because Boeing and S&S are in the same industry, but not the same market. While both companies manufacture airplanes, S&S Air manufactures small light airplanes for sale to individuals for recreational use, while Boeing manufactures large commercial aircrafts. As these companies produce and compete in two very different markets, it does not make sense to use Boeing as an aspirant company in order to analyze the performance of S&S Air. Boeing is also a much larger company than S&S Air with a wider realm of operations. The operations of S&S Air and Boeing also differ greatly in the cycle time of their order and use of parts to the manufacture and delivery to the customer. S&S Air can build an aircraft to order in as little as 5 weeks, where Boeing could take up to 2 years to build a commercial aircraft from the order. This means that the companies would have very different revenue collection and inventory cycles when compared. In order for an accurate comparison of ratios, the company used as an aspirant should be in the same market, and should be of similar size and operations, which Boeing is
…show more content…
Although they are in the light aircraft market with S&S Air, they manufacture aircrafts for commercial use, rather than for recreational use. They also have a much larger range of products than S&S Air, which means that their operations and cycle times would most likely be different when compared. For this reason, it would be recommended that Cessna Aircraft Company is not used as an aspirant company. Of the companies listed, S&S Air is most similar in size, market and operations to Cirrus Aircraft, and should therefore use Cirrus as an aspirant company for comparison of the ratio analysis.
Question 3
Short-term Solvency or Liquidity Measures
When compared with the industry, the current ratio of S&S Air at 0.75 is below the industry median of 1.43. This may mean that S&S Air are having liquidity problems.
When compared with the industry, the quick ratio of S&S Air at 0.39 is just over the industry median of 0.38. This indicates that S&S Air is not among the best or the worst at managing current accounts as indicated by liquidity.
When compared with the industry, the cash ratio of S&S Air at 0.15 is below the industry median of 0.21. Again, this could indicate liquidity problems within S&S Air or may need improvement in managing current
Although they are in the light aircraft market with S&S Air, they manufacture aircrafts for commercial use, rather than for recreational use. They also have a much larger range of products than S&S Air, which means that their operations and cycle times would most likely be different when compared. For this reason, it would be recommended that Cessna Aircraft Company is not used as an aspirant company. Of the companies listed, S&S Air is most similar in size, market and operations to Cirrus Aircraft, and should therefore use Cirrus as an aspirant company for comparison of the ratio analysis.
Question 3
Short-term Solvency or Liquidity Measures
When compared with the industry, the current ratio of S&S Air at 0.75 is below the industry median of 1.43. This may mean that S&S Air are having liquidity problems.
When compared with the industry, the quick ratio of S&S Air at 0.39 is just over the industry median of 0.38. This indicates that S&S Air is not among the best or the worst at managing current accounts as indicated by liquidity.
When compared with the industry, the cash ratio of S&S Air at 0.15 is below the industry median of 0.21. Again, this could indicate liquidity problems within S&S Air or may need improvement in managing current