Please assist with answers to the following. Using the data in the attached pict
ID: 2817293 • Letter: P
Question
Please assist with answers to the following. Using the data in the attached pictures:Airlines What do you expect to see for the two firms - look at PPE, goodwill and intangibles, growth strategies, gross versus net profit, dividend payout, inventory turnover, receivable turnover, ROE.
Beer Look at cash and short term investments, net PPE, goodwill and intangibles, current ratio, long term debt, debt to assets and debt to shareholders equity, net income and dividend payout. What would you expect to see for the two companies - how would you expect these ratios to be different?
Left two columns airplane following two columns Beer
Explanation / Answer
Airlines
When we look at goodwill and intangibles, Airline A has more goodwill than Airline B meaning Airline A has a better brand name.
When we look at plant property and equipment (PPE), Airline B is larger than Airline A, meaning Airline B has more planes than A
Both A and B have the same net profit. However A has a lower gross profit than B. This means A has better operating capabilities than B since looses out due to higher operating costs
A is dividend paying company whereas B is not and is keeping all of its profit in order to exploit future growth opportunities
In an airline inventory is nothing but the airlines seats. B is having a higher inventory turnover means B is able to fill its seats faster than A
With respect to receivables turnover, B has a higher ratio than A meaning that B is able to turn its credit into cash faster which is better.
A has a higher return on equity than B. This means the return than the shareholders of A get is better than that of B on the long run
Conclusion: I would prefer to invest in Airline A as it has more positives
Improvements for airline A would be to improve inventory and receivables turnover
Improvements for airline B is to reduce operating costs and improve margins
Beer:
If we look a goodwill and intangibles, company C is better than company D . We can conclude that company C has a better brand name than D
When we look at PPE, the plant, property and equipments, we can see than D scores over C meaning D has more fixed assets than C
If we look at the current ratio, the ratio of C is lower than 1 and that of D is higher than 2. This means C is having major problems with regards to liquidity as current ratio should always be higher than 1. So D is having better liquidity and better working capital management
Even we see debt; C is having a very high long term debt whereas D has no debt at all. Also because of this reason, the debt-to assets and the debt-to-shareholders ratio looks good for D and the same looks bad for C
The Net income of C is higher than D because C has lower cost of goods. C pay-out dividends whereas D does not.
When we see the return on equity (ROE), D has a higher ROE than C
Conclusion: I would prefer company D over C
Improvements for C: Lower the long term debt; lower the debt to assets and debt to equity ratio. Improve liquidity.
Improvements for D: reduce the Cost of goods sold and try to imrpove net income.