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    FM No3

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    siti lou
    The document compares the performance of S&S Air to industry averages across several key financial ratios. S&S Air's current, quick, and cash ratios are lower than industry averages, indicating it has fewer current assets relative to current liabilities. However, S&S Air exceeds industry averages on total asset turnover, inventory turnover, and receivable turnover ratios, demonstrating more efficient utilization of assets. S&S Air's return on assets ratio is also lower than the industry average, suggesting it is not earning as high a return from its asset investments.

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    FM No3

    Uploaded by

    siti lou
    57 views2 pages
    The document compares the performance of S&S Air to industry averages across several key financial ratios. S&S Air's current, quick, and cash ratios are lower than industry averages, indicating it has fewer current assets relative to current liabilities. However, S&S Air exceeds industry averages on total asset turnover, inventory turnover, and receivable turnover ratios, demonstrating more efficient utilization of assets. S&S Air's return on assets ratio is also lower than the industry average, suggesting it is not earning as high a return from its asset investments.

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    The document compares the performance of S&S Air to industry averages across several key financial ratios. S&S Air's current, quick, and cash ratios are lower than industry averages, indicating it has fewer current assets relative to current liabilities. However, S&S Air exceeds industry averages on total asset turnover, inventory turnover, and receivable turnover ratios, demonstrating more efficient utilization of assets. S&S Air's return on assets ratio is also lower than the industry average, suggesting it is not earning as high a return from its asset investments.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    57 views2 pages

    FM No3

    Uploaded by

    siti lou
    The document compares the performance of S&S Air to industry averages across several key financial ratios. S&S Air's current, quick, and cash ratios are lower than industry averages, indicating it has fewer current assets relative to current liabilities. However, S&S Air exceeds industry averages on total asset turnover, inventory turnover, and receivable turnover ratios, demonstrating more efficient utilization of assets. S&S Air's return on assets ratio is also lower than the industry average, suggesting it is not earning as high a return from its asset investments.

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    You are on page 1of 2

    Compare the performance of S&S Air to the industry.

    For each ratio, comment on why it


    might be viewed as positive or negative relative to the industry. Suppose you create an
    inventory ratio calculated as inventory divided by current liabilities. How do you think S&S
    Air’s ratio would compare to the industry average?

    a) Current ratio:

    The current ratio of S&S Air. Inc. is 0.74 which is lower than the industry of 1.43. That
    means S&S Air. Inc. has its current asset lesser than its current liabilities. This would
    be unusual in a healthy firm because S&S Air. Inc. has less than 1% current assets
    to pay its current short term debt, at least S&S Air. Inc. suppose to borrows over the
    long term to raise the cash, so the current ratio would be rise.

    b) Quick ratio:

    The quick ratio of 0.38 as compared to 0.35 for the industry, which shows that S&S
    Air. Inc. may have a substantial portion of its liquidity tied up in slow-moving
    inventory. Therefore, the company is better in having more cash to pay off its short
    term creditors.

    c) Cash ratio:

    The cash ratio of 0.15 which is lower than the industry of 0.21, it shows that after
    paying for its operational costs and expenses, S&S has less cash available to pay for
    its interest expense as compared to the industry, but the difference is marginal,
    therefore, the company should try to reduce its operational expenses and its reliance
    on debt to finance its operations.

    d) Total Asset Turnover:

    The asset turnover ratio of S&S is 2.01 which is greater than the industry of 0.85. In
    other word, for every dollar in assets, S&S Air. Inc. generated $2.01 in sales. This
    shows that the company has shown greater efficiency than the industry in utilizing its
    assets.

    e) Inventory turnover:

    The inventory turnover ratio of S&S Air. Inc. is 27.3 which is by far the greater
    number than the industry’s 6.15. In a sense, the company sold off or turned over the
    entire inventory 27.3 times. This also shows that the company is more efficiently
    managing their inventory.

    f) Receivable turnover:

    The receivable turnover of 54.9 as compared to 9.82 for the industry which means
    that S&S Air. Inc. collects its outstanding credit accounts and reloaned the money
    54.9 times during the year. Therefore, the company has performed better in
    collecting its outstanding amount.
    g) Return on assets:

    The return on assets for the industry is better than the S&S Air. Inc. at 0.10% and
    9.53% respectively. In other words, this shows that the company is bad in earning a
    return on its investment in assets. It only makes sense that a higher ratio is more
    favorable to investors because it shows how the industry is more effectively
    managing its assets to produce greater amounts of net income.

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