Assignment
Reference: Fundamentals of Corporate Finance Ross, 9 Canadian edition
You must read the case (Ratios and Financial Planning at Tuxedo Air Inc. on p. 107) carefully. Various assigned readings in this course lean toward value investing. Concepts related to financial statements and long-term financial planning and valuation and future cash flows will help you analyze the cases.
Preparing the Case Analysis
Step 1. Define the problem
• Be sure to identify the problem and not the symptom of a problem. For example, a decline in sales is a symptom of a problem; you must identify the actual cause of the decline in sales.
Step 2. Formulate alternative solutions to the problem
• It may be helpful to brainstorm as many solutions as you can and then narrow your list down to three or four solutions you feel are the strongest.
Step 3. Evaluate and compare the alternative solutions
• To evaluate alternative solutions you should consider their strengths (e.g., increased productivity) and their weaknesses (e.g., increased cost).
Step 4. Recommend and justify an effective solution
• Be sure to record the reasons why the chosen solution is most effective. In your analysis you must provide a recommendation that is supported by your analysis.
Questions
1. Using the financial statements provided for Tuxedo Air, calculate each of the ratios listed in the table for the light aircraft industry.
2. Mark and Jack agree that a ratio analysis can provide a measure of the company's performance. They have chosen Bombardier as an aspirant company. Would you choose Bombardier as an aspirant company? Why or why not? There are other aircraft manufacturers Tuxedo Air could use as aspirant companies. Discuss whether it is appropriate to use any of the following companies: Boeing, XOJET, Piper Aircraft, and AeroCentury.
3. Compare the performance of Tuxedo 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 Tuxedo Air would compare to the industry average?
Attachment:- Mini-Case.rar