Financial Analysis Boeing
Essay title: Financial Analysis Boeing
COMPANY’S GENERAL BACKGROUND
The Boeing Company is the world’s largest aircraft manufacturer, headquartered in Chicago, Illinois, and with its largest facilities in Everett, Washington. The number of employees working at Boeing during a census in 2005 accounts for 152,091.
Boeings two principal divisions are Boeing Integrated Defense Systems (IDS), responsible for military and space products, and Boeing Commercial Airplanes (BCA), responsible for civil airliners. Boeing is also the biggest civil aircraft manufacturer in terms of value. The company is currently presided by CEO and executive chairman Jim McNerney.
The company was founded in Seattle by William E. Boeing on July 15, 1916, together with George Conrad Westervelt, a U.S. Navy engineer, and was named “B&W” after their initials.
In 1958, Boeing began delivery of its B707, the United States first commercial jet airliner, in response to the British De Havilland Comet, French Sud Caravelle and Soviet Tupolev Tu-104; which were the worlds first generation of commercial jet aircraft.
In recent years Boeing has faced an increasingly competitive Airbus, which offers some commonality between models and the latest fly-by-wire technology. From the 1970s Airbus has increased its family of aircraft to the point where they can now offer an aircraft in almost every class Boeing does.
Part II (Consolidated Financial Accounts)
Current Assets:
Accounts receivable: We can measure the average collection period (“day’s sale outstanding”) by dividing accounts receivable by average daily sales, so that we can find the number of day’s sales that are tied up in receivables. At Boeing the ratio for 2005 is: 5,246/(54,845 divided by 365 days) = 35 days sales outstanding. In 2004 the ratio totalized 32.37 days sales outstanding. There was not a large change and we can consider it a good margin taking in consideration the size of the industry.
Inventory: The inventory turnover measures how much in sales are realized divided by the amount in inventories. This tells how much inventory the company keeps in order to sell. Analyzing it against competitors or the industry average will tell if the company does well managing its inventor or not. Boeing’s ratio is: $54845/$7940 = 6.9 times, meaning hat for every dollar Boeing has in inventory, 6.9 dollars are generated. The same ratio for Airbus accounts to:
Short term investments accounts to $554 million, surpassing by 73% the amount in 2004 ($319). That means that Boeing invested in short term securities considerably more, keeping a safe margin of cash, but investing more in order to realize more earnings.
Boeing records the potential impairment of receivables in their portfolio in a valuation account, the balance of which is an accounting estimate of probable but unconfirmed losses in the receivables portfolio. The allowance for losses on receivables relates to two components of receivables: (a) specifically identified receivables that are evaluated individually for impairment and (b) all other receivables.
They determine a receivable is impaired when, based on current information and events, it is probable that the company will be unable to collect amounts due according to the original contractual terms of the receivable agreement, without regard to any subsequent restructurings. Factors considered in assessing collectibility include, but are not limited to, a customer’s extended delinquency, requests for restructuring and filings for bankruptcy. Boeing determines a specific impairment allowance based on the difference between the carrying value of the receivable and the estimated fair value of the related collateral. The allowance for doubtful debts is $90 million.
Long term assets:
Types of capital investments:
The primary factors that affect Boeing investment include the following:
Timing of new and derivative aircraft program requiring both high developmental expenditures and initial inventory buildup; growth and contractions in business cycles; customer financing assistance; stock repurchase plan; internal investments; and acquisitions and divestitures.
Depreciation: Property, plant and equipment are recorded at cost, including applicable construction-period interest, less accumulated depreciation and are depreciated principally over the following estimated useful lives: new buildings and land improvements, from 10 to 40 years; and new machinery and equipment, from 3 to 20 years. The principal methods of depreciation are as follows: buildings and land improvements, 150%