3 compare the performance of s s air to the industry

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3. Compare the performance of S & S Air to the industry. For each Ratio comment 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. Solution:
S&S Air is above median industry for cash and current ratios. This tells that the company has more liquidity than industry. However, both these are ratios are above 3 rd quartile, so thereare companies which have higher liquidity than S&S Air. It is possible that the company may have more predictable cash flows or they are more access to short term borrowing. If an inventory is created to current liabilities ratio, S&S Air would have ratio which is lower than that of the industry median. Current ratio is above industry median while the quick ratio is above industry median. This shows that S&S Air has same inventory to current liabilities as industry median. S&S Airhas same inventory as industry median, so inventory to current liabilities has same median as that for the industry. The turnover rations are higher than the industry median, all the three turnovers are above upper quartile which means that S&S Air is more efficient than industry. The financial leverage ratios are all less than the industry median, ROA and ROE are both less than industry median but higher than lower quartile. It has debt less than comparable companies but lies within the normal range. Overall S&S Air’s performance appears to be good, the liquidity ratios indicate closer look that may be required here. Ratio Positive Negative Current Ratio Better in managing accounts May have liquidity problems. Quick Ratio Better in managing accounts May have liquidity problems.

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