Business Accounting & Finance – Value Measurement

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Boeing Financials 1 BOEING’S FINANCIAL ANALYSIS by Student’s Name Class/Course/Code Professor’s Name University/School City, State Date

Boeing Financials 2 Question One International accounting standards are rules given by the International Accounting Standards Committee. The aim is to enable the comparison of businesses globally, increase business transparency, and allow trust to occur in business transactions. The statement of cash flows, statement of comprehensive income, and statement of financial position are prepared following these accounting standards. Please apply these standards to ensure compliance with these internal accounting standards, leading to legal challenges, and a business may lose a business license due to a breach of trust and compliance lack. Boeing's financial report will be analyzed to see how the internal accounting standards have been applied and how they have been used in preparing its statement of cash flows, determination of property, plant, and equipment value, and income taxes. Statement of Cash Flows The statement of cash flows is a financial statement prepared to reconcile profits with cash to see if a business is generating profits. This arises from realizing that a business could be profitable but unable to create some money. Therefore, according to internal standards, this statement can be prepared using a direct or indirect approach (ICEAW, 2023). The intention of IAS 7 is to prepare cash and cash equivalents of a company using the operating, investing, and financing activities of a company. Under the direct approach method, cash receipts from customers, cash paid to suppliers, dividends paid, interest paid, and taxes paid are recognized under the operating activities section. On the other hand, using the indirect method, a company's profits are generally prepared under the accrual basis to account for the effects of non-cash transactions (ICEAW, 2023). The Boeing statement of cash flow is prepared using the indirect method; thus, all transactions recognized under the direct approach are not recognized. Cash

Boeing Financials 3 receipts from debtors, cash paid to suppliers, and other items recognized under the direct method are not recognized under this statement of Boeing. However, under the indirect approach, net income, depreciation and amortization, share-based plans expense, other changes in credit, changes in inventories, changes in accounts payable, changes in other current liabilities, and changes in accruals are recognized under this method. It occurs because a decline or increase in working capital elements is recognized in the company's statement of cash flows. Property, Plant, and Equipment IAS 16 deals with property, plant, and equipment. The carrying amounts of these assets are determined, and depreciation charged on them in a specific financial year is determined. The cost of an asset is recognized when a company is sure that it can receive economic benefits or cash flows from the asset, and that is the only time it is recognized in its balance sheet (ICEAW, 2023). For Boeing, the property, plant, and equipment are recognized at cost plus the accumulated interest, and then the accumulated depreciation is calculated to determine the book value of these assets. Different methods like the straight-line method, 150% declining balance method, and sum of digits method are used to calculate depreciation, but this depends on the asset (Boeing, 2022). An asset that the company has recently disposed of at $ 35 million has not been included in the balance sheet and has thus been written off or removed from the total property, plant, and equipment since the economic benefits arising from this asset have ended (Boeing, 2022). Hence, it cannot be recognized under this accounting standard, and the only thing to be done is to derecognize it from the company's books, which is what Boeing accountants have done. Removing it from the total property, plant, and equipment and recognizing its disposal as a cash inflow in the investing section of the company has led the company to experience an incoming cash flow.

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Boeing Financials 4 Income Taxes IAS 12 deals with income taxes and implements a comprehensive balance sheet method to recognize income taxes. Under this standard, companies must recognize the current and future tax transactions to recognize income taxes. The differences between the carrying amount and the tax bases of assets and liabilities are pushed forward to become deferred tax liabilities and deferred tax receivables. Boeing follows this standard in recognizing the local, state, and federal income taxes, and the deferred tax liabilities are known when there is a difference between the benefit received and measured for a financial position (Boeing, 2022). Boeing has recognized deferred current income taxes while deferred income tax assets in its balance sheet. In conclusion, the accounting standards are rules that companies follow when it comes to accounting for items that go into the financial statements, namely the balance sheet, cash flow statement, and statement of comprehensive income. The property, plant, and equipment are recognized at cost, as they bring cash flows into the business for its benefit. Derecognition of an asset occurs when an asset no longer brings cash flows to the business, especially once a property, plant, or equipment is sold. On the other hand, in the statement of cash flows, the indirect method is applied in preparing the three parts of operating, investing, and financing activities. Thus, all items that would be recognized under the direct method are avoided. Question 2: Financial ratio analysis of Boeing Introduction Financial ratio analysis is analyzing financial ratios computed from a company's financial statements to analyze the company's financial performance and condition (Scott, 2018). Financial ratios may be used to assess profitability, liquidity, efficiency, and leverage (Scott, 2018).

Boeing Financials 5 Boeing's financial ratio analysis used the most current financial statements available. The specified ratios are computed and visually shown using graphs. Financial ratios Different vital financial ratios are used to effectively examine Boeing's financial performance and health. These ratios include the current ratio, debt-to-equity ratio, and return on equity (ROE), providing unique insights into Boeing's financial performance and operational efficiency. Debt-to-Equity Ratio The debt-to-equity ratio is a leverage ratio. It is an essential indicator that evaluates how strongly Boeing relies on debt capital to keep its operations running (Scott, 2018). The ratio is calculated by dividing Boeing's debt and equity. A large debt-to-equity ratio may signify more financial risk because it suggests that a significant amount of the company's capital is produced from debt, which might result in more excellent interest rates and repayment obligations (Scott, 2018). Current Ratio In the section on liquidity ratios, the current ratio is a gauge of Boeing's short-term liquidity and capacity to satisfy its immediate financial commitments (Lalithchandra, 2021). Current Assets divided by Current Liabilities is the calculated ratio (Lalithchandra, 2021). By having a current ratio above 1.0, Boeing demonstrates a high capacity to pay short-term obligations by having more current assets than current liabilities. In contrast, a ratio that is less than 1.0 may cause liquidity issues. Return on Equity

Boeing Financials 6 ROE is a profitability ratio that measures how effectively Boeing earns profits from its shareholders' equity. ROE is calculated by dividing net income by shareholders' equity (Hertina, 2021). A high ROE suggests that Boeing successfully uses its shareholders' capital to produce profits. It is an essential indicator for investors since it represents the company's potential to create returns on shareholders' capital (Hertina, 2021). Each financial ratio has a distinct role in assessing Boeing's financial performance. The debt-to-equity ratio examines the company's capital structure and financial risk, while the current ratio assesses short-term liquidity, and ROE gauges profitability compared to shareholders' equity. Analysts and investors may acquire a more comprehensive knowledge of Boeing's financial health and operational efficiency by analyzing these ratios together. This will allow them to make more educated judgments about investing in or collaborating with the firm. Results The table below displays Boeing's financial ratio analysis findings using the most current financial statements as of June 30, 2023. Quarter ROE Current ratio Debt-to-equity ratio 31/03/2020 51.66 1.18 -4.03 30/06/2020 34.64 1.41 -5.26 30/09/2020 43.95 1.42 -5.16 31/12/2020 94.29 1.39 -3.46 31/03/2021 80.08 1.33 -3.52 30/06/2021 55.16 1.35 -3.81 30/09/2021 50.87 1.36 -4.32 31/12/2021 26.50 1.33 -3.86 31/03/2022 32.10 1.30 -3.75 30/06/2022 35.68 1.25 -3.84 30/09/2022 54.04 1.22 -3.23 31/12/2022 31.07 1.22 -3.58 31/12/2023 25.91 1.16 -3.57 31/12/2023 27.75 1.17 -3.37 Figure 1: ROE trend

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Boeing Financials 7 0 10 20 30 40 50 60 70 80 90 100 51.66 34.64 43.95 94.29 80.08 55.16 50.87 26.5 32.1 35.68 54.04 31.07 25.91 27.75 ROE Trend Boeing's ROE decreased in subsequent years, from 51.66% on March 31, 2020, to 27.75% on June 30, 2023. This reduction can be attributed to various circumstances, including the COVID-19 pandemic, the 737 MAX problem, and increased material prices. Figure 2: Current ratio trend 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.18 1.41 1.42 1.39 1.33 1.35 1.36 1.33 1.3 1.25 1.22 1.22 1.16 1.17 Current Ratio Trend

Boeing Financials 8 Boeing's current ratio has been relatively constant in recent years, hovering about 1.2. This shows that Boeing is capable of meeting its short-term obligations. Figure 3: Debt-to-equity ratio trend -6.00 -5.00 -4.00 -3.00 -2.00 -1.00 0.00 -4.03 -5.26 -5.16 -3.46 -3.52 -3.81 -4.32 -3.86 -3.75 -3.84 -3.23 -3.58 -3.57 -3.37 Debt-to-Equity Ratio Trend Due to increased borrowing to finance operations, the debt-to-equity ratio has grown from -4.00 to -3.37. Conclusion Boeing's financial ratio analysis provides valuable information on the company's financial performance and condition. Analyzing essential statistics such as return on equity (ROE), current ratio, and debt-to-equity ratio offered a thorough perspective of Boeing's financial health and operational efficiency. Notably, a trend study of these ratios over time indicates considerable changes. Boeing's ROE fell from 51.66% in March 2020 to 27.75% in June 2023, mainly owing to external issues, including the COVID-19 pandemic, the 737 MAX problem, and increased material prices. The debt-to-equity ratio went from -4.00 to -3.37, indicating a proclivity to borrow more to support operations. Boeing's current ratio has been reasonably steady, hovering around 1.2, demonstrating its continuous capacity to meet short-term

Boeing Financials 9 commitments. The data demonstrates Boeing's financial performance's dynamic character and the significance of continual analysis and strategic decision-making in response to changing market circumstances and difficulties. Question 3: Boeing's approach to supporting uncertain decisions Introduction Boeing, a leading player in the aerospace business, faces a wide range of difficulties that necessitate quick decisions in an unpredictable environment. The company's strategy technique is founded on Quattrone's concepts of inspection, interactions, mediation, and engagement (Quattrone, 2015). Numerous factors, such as economic conditions, technical improvements, and regulatory changes, can all contribute to business landscape uncertainty. Boeing has recently experienced uncertainty due to FAA certification delays for the 777X and the 737 MAX issue. Analysis of Boeing's approach to supporting uncertain decisions using Quattrone's Four Principles Scrutiny Quattrone emphasizes the significance of examination as a key component of responsible and accountable decision-making (Quattrone, 2015). Boeing has totally accepted this idea, doing extensive risk assessments, employing data analytics capabilities, and seeking expert advice. This comprehensive examination was extremely valuable in improving the design of the 787 Dreamliner. However, it notably failed to discover the major software flaws that ultimately resulted in the catastrophic 737 MAX crashes. This failure not only resulted in a loss of trust from regulatory agencies such as the FAA but also lengthy certification delays for the 777X, with significant consequences for Boeing's financial performance and market image ( Kieffer Duarte, 2022) .

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Boeing Financials 10 Interactions According to Quattrone, interactions are critical for creating consensus (Quattrone, 2015). Boeing's stakeholder management practices are an excellent example of this notion, since the corporation actively cultivates meaningful dialogues with its workers, customers, and suppliers. It's worth noting that consumer feedback was crucial in designing the 777X's design elements ( Kieffer Duarte, 2022) . However, the fallout from the 737 MAX disaster has stressed Boeing's contacts with regulatory authorities, resulting in delays in the certification process for the 777X and the loss of important market prospects. Mediation Quattrone emphasizes the need for mediation in resolving opposing stakeholder interests (Quattrone, 2015). Boeing has skillfully proved this notion through excellent collaborative efforts and negotiating platforms, most notably in the instance of the 747-8 program, which resulted in accelerated manufacturing. However, the longer length of the 777X certification procedure suggests that the mediation process may need help in reacting quickly to fast regulatory changes (Haddad et al., 2020). Engagement The fourth component of Quattrone's approach, engagement, emphasizes the necessity of a democratic decision-making process (Quattrone, 2015). Boeing has taken measures to put this philosophy into action by actively incorporating stakeholders at all levels of decision-making. However, the flaws in Boeing's engagement strategy were exposed during the 737 MAX issue, highlighting the fact that it lacked the comprehensiveness and openness essential for successful decision-making (Willingham, 2019). This experience serves as a critical lesson that must be

Boeing Financials 11 carefully applied to future aircraft developments, including the 777X, in order to strengthen stakeholder participation and decision-making processes ( Kieffer Duarte, 2022) . Boeing Profitability in Uncertainty Quattrone's ideas offer a complex framework that goes beyond governance and successfully generates organizational profitability. They are critical components in ensuring that smart decision-making is aligned with financial success. Effective monitoring scrutiny of Boeing's profit margins by detecting and reducing possible threats. Comprehensive interactions with Boeing's stakeholders, customers, and industry experts yield significant market insights. These findings shape Boeing's initiatives, resulting in higher sales and revenue growth. When firms efficiently mediate and resolve conflicts or difficulties, they streamline their operating procedures and minimize expenses ( Kieffer Duarte, 2022) . The comprehensive engagement creates stakeholder satisfaction and loyalty, laying the groundwork for repeat business, client retention, and good word-of-mouth, all of which contribute considerably to long-term success. Conclusion Boeing's use of Quattrone's Four Principles to navigate uncertainty has revealed both its strengths and opportunities for development. The aerospace behemoth has adopted the concepts of inspection, interactions, mediation, and engagement, which have proven useful in guiding its decision-making in the face of a turbulent environment. These principles, however, have exposed flaws in Boeing's strategy, notably in its reaction to the 737 MAX crisis and FAA certification delays for the 777X. Boeing's dedication to openness, employee participation, and learning procedures is highlighted in the critical review. Nonetheless, there is potential for improvement, notably in

Boeing Financials 12 improving communication with stakeholders on unclear issues and increasing diversity and inclusion initiatives to ensure a more varied variety of opinions are taken into account. Quattrone's ideals transcend beyond governance and function as profit drivers. Boeing may use these ideas to negotiate uncertainty successfully while still driving financial success. Effective inspection reduces risks, interactions provide market insights, effective mediation lowers costs, and full involvement encourages stakeholder loyalty – all of which contribute to Boeing's long-term profitability and resilience in an ever-changing aerospace business context.

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Boeing Financials 13 Reference List Boeing (2022) Boeing Annual Report 2022 , Boeing . Available at: https://www.boeing.com/company/annual-report/ (Accessed: September 16 2023). Haddad, M., Sanders, D. & Tewkesbury, G. (2020). Selecting a discrete multiple criteria decision-making method for Boeing to rank four global market regions. Transportation Research Part A: Policy and Practice , 134 , pp.1–15. Hertina, D. (2021). The current ratio, debt-to-equity ratio, and company size influence return on assets. Turkish Journal of Computer and Mathematics Education (TURCOMAT) , 12 (8), 1702-1709. ICAEW (2023) IFRS accounting standards , ICAEW . Available at: https://www.icaew.com/technical/corporate-reporting/ifrs/ifrs-standards (Accessed: September 16 2023). Lalithchandra, B. N. (2021). Liquidity ratio: a critical financial metric. Turkish Journal of Computer and Mathematics Education (TURCOMAT) , 12 (2), 1113–1114. Kieffer Duarte, M., 2022. The Boeing 737 MAX–Analysis of the crisis from a corporate strategy perspective. Scott, P. (2018). Accounting for Business. 3rd Edition. Oxford University Press Academic UK. Simons, G.M., (2021). Boeing 737: The World's Most Controversial Commercial Jetliner . Air World. Quattrone, P. (2015). Governing Social Orders, Unfolding Rationality, and Jesuit Accounting Practices.

Boeing Financials 14 Willingham, F., (2019). Boeing 707 Group: A History. Air Power History , 66 (1), 56–57.

Business Accounting & Finance – Value Measurement

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