Boeing Working Capital Ratio Analysis

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The working capital ratio measures the difference between the total current assets and current liabilities. My analysis of Boeing’s working capital ratio has shown a steady increase from $2.4 million in 2009 to $8.5 million in 2011. This is a positive indicator that the company has the ability to pay it liabilities. Boeing has a massive $374 billion backlog, amounting to five times 2011 sales. Such strong revenue visibility should allow the firm to adjust production rates and ride out economic downturns (Boeing website 2012). The current ratio takes Boeing’s current assets and divides it by their current liabilities. Boeing has seen an increase in their current ratio over the last three years. In 2009, Boeing’s current ratio was 1.07. Essentially…show more content…
This ratio and the days in inventory ratio, is a good aid in helping analyst and investors understand the time required for Boeing’s inventory to be sold, or for their receivables to be earned. This ratio highlights how fast Boeing may or may not be selling goods to their customers. The ratio indicates the numbers of times within a year that Boeing's inventory was completely sold, and is calculated by dividing the cost of goods sold to the customer by the average ending value of the inventory over the past year (Walther 2012). Boeing’s inventory turnover ratio decreased in the past 3 years. In 2009, the inventory ratio was 3.47 and the average age of each inventory was about 105 days. In 2010, the inventory ratio was 2.51 and an average age of each inventory was about 145 days. In 2011, the inventory ratio was 1.97 and an average age of each inventory was about 184 days. In 2011, Lockheed Martin’s inventory ratio was 17.67 and an average age of each inventory was about 21 days. Boeing figures are much lower than the industry standards, which also declined from 7.40 to 5.91 for the same years (Boeing website 2012). This implies that the company may have had poor sales, which contributed to the excess inventory that is being accounted for with the increase in the days in inventory…show more content…
The earnings per share are relatively neutral and holding steady. This indicates that Boeing is consistently performing at a high level and continues to grow and gain market share through the space and security segment as well as the commercial plane segment. “Boeing posted an unexpected 3 percent improvement in second-quarter 2012 net income on strong sales of commercial airplanes, the results surprised Wall Street” (LaTimes 2012). Boeing continues to maintain its reputation among competitors like Lockheed Martin and remains lucrative to investors by operating a very diverse portfolio of not only commercial and defense aircrafts, but also offering aviation support services such as technical support, air traffic management, developing missile defense system, space and intelligence infrastructure and satellite launch vehicles (Boeing Website

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