Question

The Boeing Company is under heavy investigation into the disastrous 737 Max events. The company is part of the Aerospace and Defense Industry.

Currently it appears that some key financial ratios are very close to industry norms or averages.

Current Ratio 1.03 times; Return on Assets 2.69%; Long-term Debt Ratio 17%.

As learned in Ch 3, Return on Assets (ROA) reflects both profit margin and the company's operational efficiency.

The discussion question: Is Boeing ready for what might result from the investigation? Specifically include the potential effects on the financial ratios above and why. You do not have to research the company to answer this question. The answer will include what the above ratios measure.

Answer 1

The Boeing Company's disastrous event took away the lives of many people on board and it was a second tragic loss event. No one wants to ride in Boeing and are willing to pay extra money for another flight,and are in no mood to play with their lives.

  Current Ratio =Current Assets/Current Liabilities =1.03.

Current ratio is defined as the money available to meet the short term demands when the need arises. Higher the Current ratio the company is doing better. Here according to data Current ratio is 1.03.That means the company has enough cash to pay to its debts.It means that for every $1 Current liabilities it has 1.03 current assets.

Return on Assets(RoA)=Net Income/Total Assets=2.69%.

Higher the RoA, better for the company.It comes under Profitability Ratio.It means how much company is able to generate from the assets it has.

Boeings RoA also is higher.Meaning the company is getting better income from the assets it has.

Long term debt ratio=Long term Debt/Equity=0.17 or 17%It tells us as to what percentage of total assets is financed through debt.It means that 17% of the total assets is financed through debt.It measures the overall risk of the company. Higher percentage would mean that larger protion of the assets is purchased on loan and the company should have enough cash to repay it.

Thus although the ratios looks good , means that financially they are in good position. Hence a thorough investigation of Boeings Software up gradation should take place. The company has enough current assets and hence should look into installing of better software and should get the guidance and mentorship of experts in the area before beginning the service.