Boeing’s Financial Position and Performance To gain an adequate understanding of The Boeing Company’s financial and performance status within the aerospace and defense industry an examination of the financial statement figures and ratios is vital. Boeing’s financial position in relation to the industry standard is strong. For example, Boeing’s net income of $3,715 million is on par with its competitors - such as Lockheed Martin with a net income of $3,717 million. Within this examination Boeing is only - out ranked by the United Technologies Corporation with a net income of $7,204 million. Building upon Boeing’s net income figures one can see that Boeing’s financial position is stable - although not the thriving. A comparison of the company …show more content…
Six ratios - return on assets, profit-margin ratio, accounts receivable turnover, and inventory turnover, price-earnings ratio (P/E ratio), and the debt-to-equity ratio - reveals Boeing’s performance ability and offers insight into the company’s future outlook. Boeing’s return on assets - as related to its historical performance and that of its competitors - is a key factor in the determination the company’s performance. For example, Boeing’s return on assets of 4.0% - or $0.04 of profit for every dollar of assets - are slightly below the industry standard of 4.4% and significantly below some it 's peers - who hold return on assets of 5.7%, United Technologies, and 7.7% , Lockheed Martin. The wide difference between Boeing and its peers’ return on assets demonstrates that the company is not performing at it 's optimal condition. A concern for Boeing’s performance can also be proven by its historical return on assets statistics. Boeing’s return on assets has declined since 2014 - falling from 4.8% to its lowest percentage in four year - 4.0% (S&P Capital IQ, 2016). Based upon these finding, Boeing is not effectively utilizing its assets to make a profit (S&P Capital IQ, 2016; Hicks & Hicks, 2014). “The profit-margin ratio examines the amount of profit one is able to earn for each dollar of sales revenue” (Hicks & Hicks, 2014, p. 45). Boeing’s profit-margin ratio is 13.6% - meaning …show more content…
The P/E ratio of Boeing is 23.9; while, the industry average P/E ratio is 20.1 (S&P Capital IQ, 2016). In comparison with the average and Boeing’s competitors it is clear that the earnings of investors in Boeing are reduced due to the company’s high P/E ratio. For example, Lockheed Martin P/E (19.9), Raytheon (19.7), Airbus (14.7) was all have better earnings as their P/E ratios are lower then Boeing’s ratio. However, Untied technologies high P/E ratio of 24.3 demonstrates that Boeing’s P/E ratio is not outrageously high for the aerospace and defense industry (S&P Capital IQ, 2016). The debt-to-equity ratio reveals how dependent a company is on debt financing rather then the owners’ equity - demonstrating how much the business owns and owes. For the author’s personal experience debt-to-equity ratios great then 1 uncover that more of the company’s capital is provided by lenders then owners - thus the higher the debt-to-equity ratio the higher the risk. With that idea in mind, Boeing’s debt-to-equity ratio of 1,702.5% is staggering. In comparison to the industry average of 44.6% Boeing’s debt-to-equity ratio appears to be abnormally high (S&P Capital IQ, 2016). Boeing’s high debt-to-equity ratio suggests that the company is highly leveraged - for the
This requirement makes it important to look through a majority of the return ratios, which include return on sales, return on assets, and return on equity. Additionally, investors are also interested in the ratios related to the company’s earnings, such as earnings per share (EPS) and PE ratio. Looking at return on sales, we can see that Wendy’s has a 7.27% return on sales and Bob Evans has a 1.23%, which demonstrates Wendy’s has a higher profit margin. Moreover, Wendys’ return on assets is 2.85% and Bob Evans is 1.58%. Also, Wendy’s and Bob Evan 's have return on equity ratios of 6.66% and 4.30%, respectively. All of these return ratios show that Wendy’s has a better handle on turning working capital into revenue. On the other hand, although Wendy’s return ratios are higher than Bob Evans, Bob Evans has a better performance on earnings per share and PE ratio. This is due to Bob Evans having less common stock share outstanding, which makes their earnings per share and PE ratio higher than Wendy’s. Due to the EPS being higher for Bob Evans, we would recommend that investors look towards Bob
Return on sales is decreasing and is below the industry average, but the goods news is that sales and profits have been increasing each year. However, costs of goods are increasing and more inventory is left over each year causing the return on sales to decrease. For 1995, it was 1.7% which is less than the average of 2.44% but is a lot higher than the bottom 25% of companies as seen in exhibit 3, which actually have negative sales return of 0.7%. Return on equity is increasing each year and at a higher rate than industry average. In 1995, it was 20.7%, greater than the average of 18.25% and close to the highest companies in exhibit 3, of 22.1% showing that the return in investment in the company is increasing, which is good for the owner.
The consistent high spending of capital equipment is the first reason why one would recommend reducing the debt to equity ratio. A company with higher levels of debt is less flexible in being able to adjust to new market demands and conditions that require the company to make new products or respond to competition. Looking at the pecking order of financing, issuing new shares to fund capital investing is the last resort and a company that has high levels of debt, must move to the equity side to avoid the risk of bankruptcy. Defaulting on loans occur when increased costs or bad economic conditions lead the firm to have lower net income than the payments on loans. The risk of defaulting on loans and the direct and indirect cost related to defaulting lead firms to prefer lower levels of debt. The financial distress caused by additional leverage can lead to lower cash flows available to all investors, lower than if the firm was financed by equity only. Additionally, the high debt ratio that Du Pont incurred also led to them dropping from a AAA bond rating to a AA bond Rating. Although the likelihood of not being able to acquire loans would be minimal, there are increased interest costs with having a lower bond rating. The lower bond rating signals to investors that the firm is more likely to default than if it had a higher (AAA) bond rating.
Executive Summary A key factor in determining a project's viability is its cost of capital [WACC]. The estimation of Boeing's WACC must be consistent with the overall valuation approach and the definition of cash flows to be discounted. Note that this process is a forward-looking focus and is laden with uncertainty. It is how the assumptions are modeled that many costly mistakes can be made.
Overall the Boeing Company has stayed strong in the aircraft field and with record profits for the past two years it looks like they are achieving their goals. Boeing has had to change their business direction over the past 100 years in order to stay a top of the aircraft industry. To maintain a good successful business they must have used a system similar to this SWOT analysis to see where Boeing needed to be to capitalize the market. Before Boeing decided that outsourcing was the way to go, a group of Boeing peers got around a table and weighed out the pros and cons. In their business analysis they saw a way to change one of their weaknesses, in-house work overload, into a potential strength. Major business decisions like this are much easier to commit too, with the use of a SWOT analysis.
The Boeing Corporation is one of the largest manufacturers in the world. Rivaled only by European giant Airbus in the aerospace industry, Boeing is a leader in research, design and manufacture of commercial jet airliners, for commercial, industrial and military customers. Despite enjoying immense success in its market and dominating an industry that solely recognizes engineering excellence, it is crucial for Boeing to ensure continued growth through consistent strategy formulation and execution to avoid falling behind in market share to close and coming rivals.
Overall, Horizontal analysis and financial ratios are essential factors that businesses use to monitor its liquidity. Therefore, in order to improve Apple’s ratios and profitability, the company needs to implement a strategy to increase the company’s liquidity. Business owners or managers should monitor current ratio and acid test ratio as these ratios help us to ensure the company has the proper liquid assets to pay current liabilities, to stay in operations and to expand the company. As we noted in our acid test ratio and current ratio for the company, we show a lower ratio for acid test ratio than the current ratio, which means that the company’s current assets rely on inventory. Therefore, the company needs to convert old inventory into
...gainst all odds, it has become the companies greatest asset. In order to protect their asset, Boeing is not becoming complacent, and is instead striving to make a wide variety of aerodynamic improvements.This has cemented the 737 as a market leader, and it will retain its lead for decades to come.
Technology Innovation: - Boeing should carefully analyze the market to evaluate the trends in the airline industry and aggressively invest in a new product line (top dog strategy) that could counter Airbus’s A380.
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Having a low P/E ratio with respect to the rest of the market, and the replacement cost of the firm being greater than its book value (argument 3), there is a good chance that the current stock price and the proposed offering price are too low. Although long-term debt is a better financing choice, a few of the drawbacks are pointed out. Debt holders claim profit before equity. holders, so the chances that profits may be lower than expected. increases risk to equity, may reduce or impede stock value. However, the snares are still a bit snare.
Ratio analysis are useful tools when judging the performance of a company by weighing and evaluating the operating performance (Block-Hirt). There are 13 significant ratios that can separate by four main categories, profitability, asset utilization, liquidity and debt utilization ratios. The ratio analysis covered here consists of eight various ratios with at least one from each of these main categories. These ratios were used to compare and contrast the performance of Verizon versus AT& T over the years 2005 and 2006.
The financial position of a company offers great insight on the performance of the company on short-term and long-term basis. This work argues that Facebook Inc. is a company with a subjective investment portfolio. The purpose of this paper is to use ratio analysis to determine the position of the Facebook as an investment destination. The first section explores two ratios and their implications to a potential investor. The second part evaluates whether Facebook is bankrupt. The succeeding section offers advice to potential investors. The work culminates by highlighting key points and making necessary recommendations.
Any successful business owner or investor is constantly evaluating the performance of the companies they are involved with, comparing historical figures with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of any company's effectiveness, however, more needs to be looked at than the easily attainable numbers like sales, profits, and total assets. Luckily, there are many well-tested ratios out there that make the task a bit less daunting. Financial ratio analysis helps identify and quantify a company's strengths and weaknesses, evaluate its financial position, and shows potential risks. As with any other form of analysis, financial ratios aren't definitive and their results shouldn't be viewed as the only possibilities. However, when used in conjuncture with various other business evaluation processes, financial ratios are invaluable. By examining Ford Motor Company's financial ratios, along with a few other company factors, this report will give a clear picture of how the company is doing now and should do in the future.
As Boeing’s CEO, Frank Shrontz promised to increase earnings and return on equity. Boeing had a history of making money when its competitors did not, but Mr. Shrontz wanted higher returns. The airline industry was characterized by large cash outflows for R&D and manufacturing and long payback periods over long life cycles for each new airframe design. Companies had to have deep pockets to keep the operation going while waiting for a return on their investments. If Mr. Shrontz could increase the return on equity for Boeing, it would increase the likelihood of Boeing’s continued success well into the future.