Introduction
Boeing Company is renown as an American defense corporation, as well as, a multinational aerospace. The company was founded in the year 1916 by William E Boeing. Over the years, the company has expanded through mergers and acquisition. It is renowned as the best aerospace company in the world, based on its financial performance both financially and in the stock market. The company is made up of several subunits ranging from commercial service units for defense, technology among others. The company publishes its audited financial statements by the end of every accounting period. Similarly, the company issues various types of bonds, which are callable and non callable, with a defined maturity period and a fixed or zero coupon rate.
Evaluation of company performance
Ratio analysis
The analysis of company performance will be based basically on ratios calculation. This is to have a clear understanding of the company trends in terms of financial performance and internal operations. The ratios to be analyzed include leverage ratios, liquidity ratios, profitability and assets turnover ratio.
A leverage ratio indicates the company solvency level and is analyzed using debt to asset ratio. Liquidity ratio is used to evaluate the company capability of meeting its financial obligations when they fall due for payment. The analysis is done using current ratio and quick acid test ratio. The profitability ratios are used to evaluate the company profitability in terms of utilization of resources to earn income. Gross profit margin ratio and net profit ratio are mostly used as a measure of profitability ratio. Asset turnover evaluates the extent to which the company utilizes its assets to realize revenue. The calculation of the ratios is as given.
Leverage ratio
The company leverage ratio is high as indicated by the debt to equity ratio. From the ratio calculated, the company finances most of its activities by use of debt rather than equity. The company may face solvency risk in a situation where the company liabilities exceed its resources. The recommended ratio is 1.
Liquidity ratio
The ratio is measured by the current ratio and quick ratio. As the scenario provided, the company's liquidity position is weak. Despite the fact that the company current assets are more than current liabilities, the quick ratio indicates that when inventory is deducted from the current assets, the ratio is 0.5. This is an indication that the company is not able to fully finance its maturing obligations, which are current in nature, by use of the most liquid assets.
Profitability ratio
16 percent of the revenue collected by the company is used to finance the cost of revenue. This is an indication that almost 84 percent of the revenue is used to cover the cost of revenue. Similarly, almost 8 percent of the gross profit is realized as net profits. The expenses of the company are covered with 92 percent of the gross profit realized. This is an indication that the company is not fully efficient in mitigating its expenditure level to realize higher net profits.
Asset turnover ratio
As an activity or performance ratio, the ratio indicates that the company is inefficient in the utilization of its assets to realize revenue. Few days are required for the company to rank as efficient in realization of revenue from asset utilization.
Bonds' performance
In the recent financial period, the company has issued various bonds in the bond market. The bonds are callable and non callable bonds with fixed or zero coupon rate. This is an indication that the rate is not subject to any changes. Zero coupon bonds are bonds which mature at the issue price. Boeing 3.5%, Boeing 4.865%, Boeing 5%, Boeing 6% are some of the bonds that have been issued by the company. The yield to maturity of the bonds is 0.49%, 2.05%, 0.52%, 1.74% respectively.
The United States, three months Treasury bill as indicated by the federal government of the United States, is 0.05 percent as at 15 May 2013. Based on the dates when the company bonds are issued, the United States three months bonds yield to maturity is 0.06 percent. On average, the Treasury bills yield to maturity is 0.04percent. Based on the yields to maturity rate, the company bonds are more attractive to investors than treasury bills. The return earned from the company bonds is higher than that of treasury bills. However, the treasury bills are characterized by risk free factor, an attribute which is not found in the company bonds. Therefore, basing the analysis on the risk factor, the treasury bills are attractive to a risk averse investor. Therefore, the decision to choose the option under which to invest is based on returns or risk. The ranking of the bonds and treasury bills is based on those two factors whereby, treasury bills are the best option when ranked on risk factor and company bonds are attractive when ranked under rate of return.
Works Cited
UNITED STATES SECURITIES AND EXCHANGE COMMISSION . "THE BOEING COMPANY FORM 10K." (2012): 1-120.
