You have been hired to help Q&A Aviation to evaluate their current financial position and make recommendations to help them move forward. They have been in business for 10 years, and manufacture and sell light airplanes, mostly to individuals who own and fly their own planes. These planes have been praised for safety and reliability by industry analysts, and sales have been steadily growing. Q&A sells two models: the Eagle for $78,000 and the Kingfisher for $55,000. The company generally builds planes to order using prefabricated parts, which means that they can complete an order in about five weeks. They require a deposit at the time of the order, and get another partial payment around week three. Their competitors can take up to a year and a half to complete a plane once it is ordered. The founders are considering making some planes without orders that they would keep on hand and sell at a premium to someone who wanted one even faster than five weeks. They have provided you with the following financial information: Q&A Aviation Balance Sheet (000s) Assets 20X1 20X2 Liabilities and Equity 20X1 20X2 Cash 1067 440 Accounts Payable 654 889 Accounts Receivable 823 708 Notes Payable 2300 2030 Inventory 1296 1038 Accruals 267 275 Total Current Assets 3186 2186 Total Current Liabilities 3221 3194 Plant, Property and Eq. 21663 23804 Long Term Debt 6477 5044 Accumulated Dep’n (6314) (7682) Fixed Assets (Net) 15349 16122 Common Stock 350 350 Retained Earnings 8487 9720 Total Equity 8837 10070 Total Assets 18535 18308 Total Liabilities and Equity 18535 18308 Q&A Aviation Income Statement (000s) 20X1 20X2 Sales 28934 30499 Cost of Goods Sold 19978 22225 Gross Profit 8956 8274 Expenses 3612 3867 Depreciation 1145 1368 EBIT 4199 3039 Interest 523 478 EBT 3676 2561 Tax (30%) 1103 768 Net Income 2573 1793 Dividends Paid 520 560 Additions to Retained Earnings 2053 1233 In addition to the company information, they have acquired industry comparison information as shown in the following table: Industry Q&A 20X1 Q&A 20X2 Current Ratio 1.43 0.98 0.68 Quick Ratio 0.38 0.58 0.35 ACP 15 days 10 days 8 days Inventory Turnover 4.90 15.4 21 Fixed Asset Turnover 0.56 1.88 1.89 Total Asset Turnover 0.68 1.56 1.66 Debt Ratio 0.52 0.52 0.44 Times Interest Earned 8.06 8.02 6.35 Gross Profit Margin 35.2% Profit Margin 4.0% Return on Assets 10.5% 13.8% 9.79% Return on Equity 16.5% 29.1% 17.8% Complete the chart above comparing the company to the industry. Write your analysis of the changes that have been made in the company over the past two years.
You have been hired to help Q&A Aviation to evaluate their current financial position and make recommendations to help them move forward. They have been in business for 10 years, and manufacture and sell light airplanes, mostly to individuals who own and fly their own planes. These planes have been praised for safety and reliability by industry analysts, and sales have been steadily growing. Q&A sells two models: the Eagle for $78,000 and the Kingfisher for $55,000.
The company generally builds planes to order using prefabricated parts, which means that they can complete an order in about five weeks. They require a deposit at the time of the order, and get another partial payment around week three. Their competitors can take up to a year and a half to complete a plane once it is ordered. The founders are considering making some planes without orders that they would keep on hand and sell at a premium to someone who wanted one even faster than five weeks.
They have provided you with the following financial information:
|
Q&A Aviation |
|||||
|
Assets |
20X1 |
20X2 |
Liabilities and Equity |
20X1 |
20X2 |
|
Cash |
1067 |
440 |
Accounts Payable |
654 |
889 |
|
|
823 |
708 |
Notes Payable |
2300 |
2030 |
|
Inventory |
1296 |
1038 |
Accruals |
267 |
275 |
|
Total Current Assets |
3186 |
2186 |
Total Current Liabilities |
3221 |
3194 |
|
|
|
|
|
|
|
|
Plant, Property and Eq. |
21663 |
23804 |
Long Term Debt |
6477 |
5044 |
|
Accumulated Dep’n |
(6314) |
(7682) |
|
|
|
|
Fixed Assets (Net) |
15349 |
16122 |
Common Stock |
350 |
350 |
|
|
|
|
|
8487 |
9720 |
|
|
|
|
Total Equity |
8837 |
10070 |
|
Total Assets |
18535 |
18308 |
Total Liabilities and Equity |
18535 |
18308 |
|
Q&A Aviation Income Statement (000s) |
20X1 |
20X2 |
|
Sales |
28934 |
30499 |
|
Cost of Goods Sold |
19978 |
22225 |
|
Gross Profit |
8956 |
8274 |
|
Expenses |
3612 |
3867 |
|
|
1145 |
1368 |
|
EBIT |
4199 |
3039 |
|
Interest |
523 |
478 |
|
EBT |
3676 |
2561 |
|
Tax (30%) |
1103 |
768 |
|
Net Income |
2573 |
1793 |
|
Dividends Paid |
520 |
560 |
|
Additions to Retained Earnings |
2053 |
1233 |
In addition to the company information, they have acquired industry comparison information as shown in the following table:
|
|
|||
|
|
Industry |
Q&A 20X1 |
Q&A 20X2 |
|
|
1.43 |
0.98 |
0.68 |
|
Quick Ratio |
0.38 |
0.58 |
0.35 |
|
ACP |
15 days |
10 days |
8 days |
|
Inventory Turnover |
4.90 |
15.4 |
21 |
|
Fixed Asset Turnover |
0.56 |
1.88 |
1.89 |
|
Total Asset Turnover |
0.68 |
1.56 |
1.66 |
|
Debt Ratio |
0.52 |
0.52 |
0.44 |
|
Times Interest Earned |
8.06 |
8.02 |
6.35 |
|
Gross Profit Margin |
35.2% |
|
|
|
Profit Margin |
4.0% |
|
|
|
Return on Assets |
10.5% |
13.8% |
9.79% |
|
Return on Equity |
16.5% |
29.1% |
17.8% |
|
|
|
|
|
|
|
|
|
|
- Complete the chart above comparing the company to the industry.
- Write your analysis of the changes that have been made in the company over the past two years.
- Write your analysis of the company as it compares to the industry ratios.
- What areas to you recommend the company to concentrate on to improve their financial health?
- Complete the
cash flow statement for 20X2.
| Particulars | 20X1 | 20X2 |
| Gross profit | 8956 | 8274 |
| Sales | 28934 | 30499 |
| Gross Profit %= (GP/ Sales)*100 | 30.95 | 27.13 |
| Net Income | 2573 | 1793 |
| Net Profit %= (NP/Sales)*100 | 8.90 | 5.88 |
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
