Industry Averages and Financial Ratios Learning Team C
Essay by tmsedl • August 14, 2015 • Research Paper • 469 Words (2 Pages) • 1,379 Views
Industry Averages and Financial Ratios
Learning Team C
FIN/370
July 24, 2015
Thomas Rietta
Boeing
Located in Chicago, Boeing is the world's largest aerospace company and leading manufacturer of commercial jetliners and defense, space and security systems. As a top U.S. exporter, the company supports airlines and U.S., as well as allied government customers in 150 countries. Boeing products and tailored services include commercial and military aircraft, satellites, weapons, electronic and defense systems, launch systems, advanced information and communication systems, and performance-based logistics and training. (Boeing, 2015)
Industry Averages and Financial Ratios
The Tables below are comparing Boeing’s ratios for 2013/2014 with industry standards of 2012.
Solvency Ratio
Ratio | Boeing 2013/2014 | Industry Standard 2012 Comparison | ||
Upper | Median | Lower | ||
Quick Ratio | .43/.37 | 1.60 | .60 | .30 |
Current Ratio | 1.26/1.20 | 3.40 | 1.90 | 1.40 |
Current Liabilities/Net Worth | .56/.57 | 25.60 | 41.20 | 117.40 |
Current Liabilities/ Inventory | 1.20/1.21 | 119.20 | 127.50 | 205.40 |
Total Liabilities/Net Worth | 1/1 | 26.60 | 78.10 | 335.70 |
Fixed Assets/Net Worth Ratio | .11/.12 | 29.90 | 45.10 | 71.80 |
As you can see when it comes to solvency Boeing is well in the Upper category in every category except for quick ratio and current ratio. Quick ratio is in the median category, which puts them at a disadvantage. Current ratio is in the lower category but Boeing can still pay current liabilities.
Efficiency Ratio
Ratio | Boeing 2013/2014 | Industry Standard 2012 Comparison | ||
Upper | Median | Lower | ||
Collection Period Ratio | .00/.01 | 24.10 | 35.80 | 61.90 |
Sales/Inventory | 2.02/1.94 | 11.40 | 7.30 | 3.40 |
Assets/Sales | 1.07/1.09 | 47.30 | 107.70 | 180.40 |
Sales/NetWorking Capital | 1.33/1.34 | 6.60 | 5.50 | 4.20 |
Accounts Payable/Sales | .11/.12 | 3.90 | 7.00 | 13.00 |
As for efficiency, Boeing is in the upper category in three out of five categories. The two that are not in the upper category are actually in the lower category. Sales/inventory and sales/net working capital are the two categories in the low. Sales/inventory is in the low which means that when compared to the 2012 industry standards they are not having the sales or inventory turnover that competitors are having/doing. Sales/net working capital shows that the company needs funds to raise sales.
Profitability Ratio
Ratio | Boeing 2013/2014 | Industry Standard 2012 Comparison | ||
Upper | Median | Lower | ||
Return/Sales | .05/.06 | 6.60 | 4.50 | -0.30 |
Return/Assets | .05/.05 | 9.00 | 4.50 | 0.40 |
Return/Net Worth | .05/.06 | 19.70 | 13.40 | 3.40 |
Profitability is in the lower category in every section. This is showing that in 2012 Boeing would have not done well in profitability when put against the industry standards.
Conclusion
Boeing is holding their own in comparison to industry standards (2012). The can still pay the bills and maintain business. However, it also shows that they have room for improvement. Additional sales would help not only in regards to Inventory turnover, but ultimately it will assist in the improvement of company profits. As a leader in their industry we feel as though the company will improve over time.
Exhibit A
2013-2014 Ratios Details
Ratio | Equation | 2013 Numbers | 2013- Ratio | 2014 Numbers | 2014- Ratio |
quick ratio | current assets- inventory/current liabilities | 65074-42,912/51486 | 0.430 | 67,785-46,756/56,717 | 0.371 |
current ratio | current assets/current liabilities | 65074/51,486 | 1.264 | 67785/56717 | 1.195 |
current liabilities/net worth | current liabilities/net worth | 51486/92,663 | 0.556 | 56717/99,198 | 0.572 |
current liabilities/inventory | current liabilities/inventory | 51486/42912 | 1.200 | 56717/46756 | 1.213 |
total liabilities/net worth | total liabilities/net worth | 92663/92,663 | 1.000 | 99198/99198 | 1.000 |
fixed assets/net worth | fixed assets/net worth | 10224/92663 | 0.110 | 11007/92633 | 0.119 |
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collection period ratio | Accounts Receivable/Credit Sales/365 | 6,546/3627/365 | 0.005 | 7729/3371/365 | 0.006 |
sales/inventory | sales/inventory | 86,623/42912 | 2.019 | 90,762/46756 | 1.941 |
assets/sales | assets/sales | 92663/86623 | 1.070 | 99198/90726 | 1.093 |
sales/ net-working capitol | sales/ net-working capitol | 86623/65,074 | 1.331 | 90726/67785 | 1.338 |
AP/sales | AP/sales | 9498/86623 | 0.110 | 10667/90762 | 0.118 |
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return/sales | return/sales | 4585/86623 | 0.053 | 5446/90762 | 0.060 |
return/assets | return/assets | 4585/92663 | 0.049 | 5446/99198 | 0.055 |
return/net worth | return/net worth | 4585/92663 | 0.049 | 5446/92633 | 0.059 |
***Numbers in millions |
References
Boeing Company Website, retrieved July 25, 2015 http://www.boeing.com/company/
University of Phoenix, link Dun & Bradstreet, retrieved July, 2015
http://www.mergentkbr.com.contentproxy.phoenix.edu/index.php/login/iplanding
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