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Financial Analysis of Boeing
Mouza AlHameli, Aalia Ibrahim, Aishah Althabahi, Fares Alketbi, Abdulla Alkatheeri, Sanaa
Alderei
Supervised by:
Professor Haitham Nobanee
Abstract
The financial ratio analysis of the market-leading company Boeing was conducted. Boeing's
financial statements, including most of the recent financial disclosures of the company, were
used to compile the data. To compare the company's success with past years, financial data was
obtained for five years, namely 2016, 2017, 2018, 2019, and 2020. The data was gathered from
the financial statements of Boeing for five years and organized all the necessary data in the data
and methodology section of the report. After organizing the data financial analysis of the
company was conducted which include the use of financial ratios to best depict the picture of
the company. The financial ratios were Liquidity ratios, asset management ratios, profitability
ratios, and market value measures ratios. After evaluating the ratios of Boeing for five years the
ratios were presented in the form of graphs for the best purpose. Each ratio was thoroughly
discussed and suggested solutions for each ratio were to comprehend the best solution for the
company. Boeing has shown a loss in income for the last two years. There can be multiple
reasons for the loss of Boeing incurred in these two years but the main reason for the financial
loss is the global pandemic which has affected almost every business of the world specifically
airline companies and those which manufacture the airlines. Besides these, Boeing has shown
incredible results when calculating the different ratios. It means that companies have bright
prospects, and they will again start profit for their shareholders. So, it is advised for the
shareholders to hold the stocks of the company because the world is improving after taking
precautionary steps against the pandemic so the share price of Boeing may increase.
Keywords: Financial analysis, financial statement, financial ratio, share price.
Table of Contents
Abstract: .................................................................................................................................... 1
1. Introduction: ..................................................................................................................... 3
1.1. Commercial Airplanes: ................................................................................................ 3
1.2. Defense, Space, and Security: ..................................................................................... 4
1.3. Boeing Global Services: .............................................................................................. 4
1.4. Boeing Capital Corporation: ........................................................................................ 4
1.5. History: ........................................................................................................................ 5
1.6. Mission and Vision: ..................................................................................................... 6
1.7. Employment Data: ....................................................................................................... 7
1.8. Order and Deliveries: ................................................................................................... 7
1.9. Impact of Global Pandemic on Boeing: ...................................................................... 8
2. Literature Review: ............................................................................................................ 9
3. Data and Methodology: .................................................................................................. 11
4. Financial Analysis and Discussions: .............................................................................. 12
4.1. Liquidity Ratios: ........................................................................................................ 13
4.2. Financial Leverage Ratios: ........................................................................................ 15
4.3. Asset Management Ratios: ........................................................................................ 17
4.4. Profitability Ratios: .................................................................................................... 19
4.5. Market Value Measures: ............................................................................................ 21
5. Conclusion: ...................................................................................................................... 23
References: .............................................................................................................................. 24
1. Introduction:
When it comes to aerospace’s Boeing is counted on the top. It is the leading manufacturer of
defense, aircraft, airplanes, space, and security systems as well as provides after-sale services
for clients. It is the biggest company in America that manufactures jetliners and then exports
them to several allied government customers in more than 150 countries worldwide. The
following are the main products of Boeing based in the US (Boeing, 2021):
1. Aircraft (Military and Commercial)
2. Weapons (Missiles etc.)
3. Satellites
4. Defense Systems
5. Launch Systems
6. IT
7. Logistics
8. Training
Boeing has a name tradition in the field of aerospace by working with leadership and
innovation. As the customer's needs are changing regularly the company is also expanding its
products and services to reach the needs of its customers. Boeing is home to capabilities that
includes creating efficient airplanes by innovating its design, building, defense system, and
military platforms for the needs of customers. Boeing has a large customer base by employing
more than 140,000 people in the United States and 65 countries worldwide. Due to the large
number of employees working in Boeing, it makes the company a talented, diverse, and creative
work for the people (Britannica, 2019).
Boeing has three main working units that include manufacturing of commercial airplanes,
Defense for allied governments and its space and security, and services offered globally. We
will discuss the main units of Boeing (Britannica, 2019).
1.1. Commercial Airplanes:
Boeing is a market leader in producing the best commercial jetliners for years. Nowadays the
company manufactures the following models of jetliners (Wikipedia contributors, 2022):
1. Boeing 737
2. Boeing 747
3. Boeing 767
4. Boeing 777
5. Boeing 787
6. Boeing Business Jetliners
7. Boeing 787-10 Dreamliner
8. Boeing 737 MAX
9. Boeing 777X
Serial numbers 7,8, and 9 are the latest innovation of Boeing because it has improved the
jetliners and developed them. Boeing has produced more than 10,000 jetliners delivered to
several countries worldwide. Almost half of the world's fleet has been provided by the
corporation. Boeing also builds cargo planes, which account for almost 90% of all cargo flown
across the world (Wikipedia contributors, 2022).
1.2. Defense, Space, and Security:
Defense, Space and Security as termed as BDS is a diversified, international organization that
is working to provide solutions for the following domains (Boeing, 2021):
1. Design
2. Manufacturing
3. Modification
4. Services to the commercial derivatives
5. Rotorcraft
6. Satellites
7. Exploration of space by human
8. Autonomous system
Boeing also offers services beyond mentioned above with the help of broad portfolios driven
by the vision described by the company which is to connect, protect and inspire the world with
the help of innovation in aerospace. BDS is working continuously to leverage information
technology and continue its investment in R&D to improve the platforms and capabilities
(Britannica, 2021).
1.3. Boeing Global Services:
Boeing is considered the leading producer of commercial and platforms for defense systems.
Boeing is also providing services and support for after-market sales for mixed fleets around the
world. the company aims to deliver innovative, cost-effective, complex, solutions services for
the commercial companies, allied governments, and space customers irrespective of the fact
that who manufactured the products which mean Boeing does not provide services for its
products as well as to those products which are manufactured by the competitors (Wikipedia
contributors, 2022).
1.4. Boeing Capital Corporation:
To facilitate the customers the company also provides financing solutions for their customers
with the name of Boing Capital Corporation. While working closely with the commercial
flights’ companies, allied governments, and space customer, the company also ensure the
financial needs of the customers and provide financial services to those companies which are
short of funds. Due to these diverse courses of services provided by the company Boeing has
made a name in the market leaders of providing services to its customers (Boeing, 2021).
1.5. History:
The history of Boeing is more than century now. The company was started in 1916 by a wood
businessman. He was accompanied by his friend Conard to start an aviation company (museum
of flight, 2019).
In 1917, they renamed the established company Boeing Airplane Company. The company
started building flying boats for the Naval Force during the First World War. After the success
of these flying boats, in the 1920s and 30s, the company sold its trainers, planes, and bombers
to the military force of the United States. In the late 1920s Boeing also introduced a mail service
with an air service by naming it as Airmail (Boeing History, 2022).
When World War 1 was over then the company enhances the product so when the 2nd World
War came the company has built numerous famous aircraft that includes the following major
names (museum of flight, 2019):
1. Model 247 double engine named as Monoplane
2. Boeing Model 314 flying boat and recognized as one of the most famous American
clipper class jets.
3. Model 307 Stratoliner: This was the first Boeing airline having a built-in pressurized
cabin
4. Legendary Bombers by Boeing
5. The Flying Fortress (Model B-17)
6. Super Fortress (Model B-29)
These flagship aircraft pay a significant role in the 2nd World War. After a year when the War
was over Boeing started working on manufacturing planes because the company committed to
the military. So, Boeing develop a six-engine jet (Model B-47 Stratojet) in 1947. After the
successful launch of this aircraft, the company built two famous jetliners that were Model B-52
and Jet bombers (O’Connell, 2020).
In 1970 Boeing started expanding its operation into the rocket and spaceship producing
program. The North American Division of Boeing was in process of the developing the Apollo
Program. The program also includes Saturn V rockets assembly and its launch of it. In this
decade Boeing also worked for NASA to develop a space shuttle for them. Boeing worked to
establish command of Apollo and modules of services. Besides these Boeing developed engines
of rockets that were used in several United States space programs (museum of flight, 2019).
Boeing bought Rockwell International's aerospace and defense division in 1996. After buying
Rockwell International the company focused on the operations of avionics, automation,
communications, and e-commerce. After a few years, Boeing renamed its avionics operations
Rockwell Automation (Boeing History, 2022).
1.6. Mission and Vision:
The mission statement of Boeing states “we want people to work together in a single enterprise
globally to become leaders in the aerospace industry”. As they are already market leaders they
are working on their research and development to provide more beneficial services and products
to their customers with an aim of diverse working cultures in their company (SA, 2021).
The vision of Boeing mainly focused on diversity and teamwork. The company believes in a
diverse working environment where people with different environments and cultures come
together and work together. It will bring innovation to the company and help the company to
achieve its strategic goals by working in a team and gaining the market of the aerospace industry
(Sorbello, 2020).
1.7. Employment Data:
As the company is working in more than 160 countries around the world. which created
hundreds of employment opportunities. These employees work on a full-time and part-time
basis which include laborers, contingent labors, those employees who went for studies, and the
current workforce of the industry. The following statistics will show the number of employees
working in Boeing (Macrotrends, 2018).
1.8. Order and Deliveries:
As we have shared the employment statistics of the company now, we will share the data of
orders completed by the company. Boeing has delivered its products which include jetliners,
aircraft, rockets, and weapons to every country which have a military. The data of the orders
and deliveries are as follow (Boeing, 2021a):
1.9. Impact of Global Pandemic on Boeing:
The Global pandemic has affected every economy of the world. because the world has stopped
for a time being. Due to this Boeing being a professional manufacturer of jetliners, aircraft,
weapons, and rockets, has also faced financial losses in these years. The reason for the loss of
Boeing is due to the loss of the customers of the company. The main customer of Boeing is
commercial airline companies. In the pandemic, most of the countries stopped flight operations
with one another because of the spread of the COVID-19 novel coronavirus. So, airlines were
not in operations which causes losses for almost every airline company. The airline company
stopped buying new airplanes and repairing and maintenance of their flights which eventually
resulted in the loss for Boeing. Boeing has incurred losses in recent years but now they have
made amendments in their strategies to overcome the loss incurred by them. As a result, their
share price has started getting its old position in the market. They have also started working in
the e-commerce industry because this pandemic has enhanced the online business. So, the
governments of different countries deal with Boeing virtually. So, the global pandemic has
affected the overall operation of the company (NPR, 2020).
2. Literature Review:
The financial analysis of the company has been conducted to evaluate the performance of the
company. Due to limited literature available on the aviation industry and the products in which
the company is dealing, we were bound to discuss the literature of previous research and we
used most and significant papers and articles data to reflect the financial ratio analysis of Boeing
that works in the aviation industry. The literature review gives a thorough idea of the financial
analysis of the company to determine the significance of conducting a ratio analysis of a
company like Boeing (Stock Analysis, 2018).
Alkhyeli et al., (2020) conducted research in which he studied the financial status or position
of the company named Pfizer. The study covered a period of 4 years from 2017 to 2020. The
author used the ratio analysis technique or method to investigate the firm within that time. Four
ratios were used for this purpose. Those four ratios were profitability ratio, debt ratio, liquidity
ratio, and ratios related to cash flow. Analyzing these ratios, we can conclude that the company
is below the industry average. In other words, the company's performance is ordinary in
comparison to the market. According to the conclusions of the research, the company's
performance is strong in certain areas while it needs to focus on others. For instance, the
liquidity ratio of the company showed that the company will face difficulties while paying its
short-term debt. However, the company’s profit margin is good enough to convince investors
to invest in the company (Almansoori et al., 2021).
Research was undertaking to analyze the hospitality industry in the COVID-19 pandemic. The
study considered several factors such as hotel workers, loss of jobs, effect on revenue, demand
and supply, safety and health issues, travelers’ behavior, and consumers’ preferences. This
study compared Covid19 with other pandemics and try to analyze what are the similarities
between the current pandemic and other pandemics concerning the impact on the hospitality
industry. It analyzed the methods and strategies that can be helpful in the pandemic to ensure
survival and protect itself from huge losses (Davahli et al., 2020).
In the reforms of the Indian economy, an exploratory study was conducted on the hospitality
industry (Brako et al., 2017). According to the research, the hotel industry is playing a major
role in the success of the tourism industry. It shows the culture, miniature, and lifestyle of the
country. It also creates a strong image of the country in the outside world that helps in taking
the business internationally. The Indian hotel industry has become a well-established and
modern industry. Therefore, the owners need to take accurate, quick, and timely decisions to
expand their business to global markets. If they fail to do so, they will miss an opportunity to
grow. The government also provides help to hotel owners to expand the business and earn more
revenue.
Al Ghanem et al., (2021) undertook research and analyzed the relationship between media
platforms and the hotel industry. It has been observed that social media contributes to the
expansion of the resort and hotel business. It enhances the growth of the growth. In other words,
social media helps hotels to increase their customer base and earn generate higher sales with
low marketing costs. However, misuse and sharing wrong and misleading information about
the industry can also affect hotels negatively. A single negative comment or statement can
directly affect the brand image of the hotel. Therefore, it is necessary to avoid sharing negative
and wrong information about hotels. Social media owners should apply strict rules and
regulations to stop such actions.
Singh (2019) conducted a similar study that analyzed the hospitality industry and different types
of hotels in the industry. It investigated the jobs opportunities that are available to people in the
hotel industry, the new trends in the industry, and the different types of hotels in the industry.
Macroeconomic variables were used to conduct the study. With the help of those
macroeconomics variables, the situation of the Indian hotel industry and its significance was
analyzed and evaluated. According to the study, hotels should provide quality and convenient
services to customers. It will increase sales and will create a positive and long-term brand image
of the hotel.
Another study was carried out to look at the behavior of customers concerning the hotel industry
(Amanda, 2019). The study was conducted while targeting the region of Kadesh. According to
the study, the perception of people is changing slowly and gradually when it comes to the hotel
industry. The reason is that every single individual is now earning money and has their financial
status. This compels an individual to change its perception of the industry. When the income of
the people increases, they invest and spend more on the hotel industry. Therefore, owners of
hotels must understand this point and understand other market trends. In other words, owners
must be prepared for the change in trends related to the economy and global markets and come
up with appropriate strategies to adjust themselves according to the situation.
In the Calabarzon area, another investigation was undertaken. The difficulties and new
developments in the hotel business were studied in this study. According to the study's
conclusions, the hotel business plays an important role in the global tourist industry. It looked
into several hotel sector trends. Food supply chains, hotel lifestyles, hotel brand names,
technology use, and hotel sector norms and regulations are all examples of these developments
(Hernandez, 2021). First, the study looked at the most common issues in the hotel business.
After that, it investigated the answers to those difficulties and proposed numerous approaches
to dealing with them. This study was quantitative, and the relevant data was collected from the
defined sample using a survey approach. The study postulated that there is a considerable
variation in hotel trends between managers, hotel owners, and customers.
3. Data and Methodology:
To evaluate the financial ratios of Boeing, data for 5 years was needed. To collect the data for
Boeing, the following websites were authentic to get them (Angel One, 2021):
• Yahoo finance
• Boeing Official website
• WSJ Market
The data specifically gathered from the financial statements of Boeing. The data were collected
for five years starting from 2016 to 2020. The data for the year 2021 was not taken because it
was not consolidated yet therefore if this data were taken then there were probabilities that the
result of financial ratios may not reflect the true picture of the company (Angel One, 2021).
The purpose of finding the financial ratios for the company was to identify the performance of
the company whether the company is growing, stagnant, or declining, and what should be done
to overcome if the company is not improving. The below table shows the data taken from the
balance sheet and income statement of Boeing for the past 5 years are 2016, 2017, 2018, 2019,
and 2020 (Yahoo Finance, 2022).
Accounts
2016
2017
2018
2019
2020
Current Assets
62488
85194
87830
102229
121642
Current Liabilities
85987
88620
81590
97312
87280
Inventory
43199
61388
62567
76622
891715
Cash
8801
8813
7637
9485
7752
Total Assets
89997
112362
117359
133625
152136
Total Equity
955
680
410
-8300
-18075
Long Term Debt
33658
31456
35359
44613
82931
EBIT
5538
5106
12079
-1537
-12320
Interest
306
360
475
722
2156
Depreciation
1690
1807
2114
2271
2246
COGS
80790
76612
81490
72093
63843
Average Inventory
82987.5
93261
107905.5
930026
527754.5
Sales
94571
94005
101127
76559
58158
Accounts Receivables
9260
11397
14364
12471
10051
Net Fixed Assets
12807
12672
12645
12502
11820
Inventory Turnover
1
1
0.76
0.07
0.12
Average A/R
16,027
20,063
19,653
16,287
17,282
A/R Turnover
6
5
5.145626622
4.700764437
3.36533287
Net Income
4,892
8,452
10,453
636
11,873
Price per share
281.36
294.91
327.08
332.76
214.06
As we can see the table above is the combination of all the important financial disclosures. The
industry in which the industry doing business is one of the big industries of the world, but it
was also get affected by some factors (Boeing, 2021b).
4. Financial Analysis and Discussions:
As is discussed earlier it is important for companies irrespective of their industry and market,
to analyze the performance of the company regularly. The Financial Analysis of Boeing is a
process to evaluate the business thoroughly. The evaluation includes the review and analysis of
Boeing’s projects, businesses, budgets, and other transactions related to finance. The prime
purpose of the financial analysis of Boeing will be to analyze the condition of the company.
There are three conditions for every business that is stable, solvent, liquid, and profitable. These
analyses were performed by professionals to prepare a financial analysis report with the help of
ratios, variables, and other techniques (Corporate Finance Institute, 2022).
We looked at Boeing's financial statements with the help of ratios that were calculated based
on the data provided by the company financial department on the website. The analysis can be
considered as true and fair for Boeing. The analysis was done by finding the following ratios
(Bdc, 2021):
1. Liquidity ratios
2. Leverage ratios
3. Asset Management Ratios (AMR)
4. Profitability Ratios
5. Market Value Measures
We will evaluate and discuss the above ratio one by one for Boeing.
4.1. Liquidity Ratios:
All the companies try to figure it out to pay off at least the short-term debts which they will
have to pay. We are aware that businesses have financial commitments, which can be long-term
or short-term in nature. Finally, there's the liquidity ratio. Liquidity ratios indicate whether a
corporation can pay off its short-term debt commitments without having to raise any more
external money (Cleartax, 2021). Three ratios sum up the liquidity ratios. These ratios are
a. Current ratio
b. Quick ratio
c. Cash ratio
The following table shows liquidity ratios calculated for Boeing:
LIQUIDITY RATIO
Method
2016
2017
2018
2019
2020
Current Ratio
Current Assets/Current Liabilities
0.73
0.96
1.08
1.05
1.39
Quick Ratio
(Current Assets - Inventory)/Current Liabilities
0.22
0.27
0.31
0.26
-8.82
Cash Ratio
Cash/Current Liabilities
0.10
0.10
0.09
0.10
0.09
The above table shows the data for five years. Coming to the current ratio of Boeing. The result
show that the ratios are 0.726, 0.961, 1.07, 1.05, and 1.39 in 2016, 2017, 2018, 2019, and 2020
respectively. The current ratio determines the capability of Boeing that it will be able to pay off
its short-term debts in one year. In most cases, the idea and an acceptable result of the current
ratio are between 1.3 to 3. The company has a low ratio from the acceptable mark while in
recent years Boeing has achieved the acceptable current ratio results. Although the other years'
result is also good (Investopedia, 2021).
The next ratio in the table is the Quick ratio which is also called the acid test ratio. The purpose
of the quick ratio is to evaluate the current assets of the company that is enough for the debt to
be paid off. An inventory will be excluded from the current assets when calculating the quick
ratio for Boeing. We have calculated the quick ratio for Boeing, which is 0.27, 0.22, 0.31, 0.26,
and -8.82 in 2016, 2017, 2018, 2019, and 2020 respectively. When a company has a quick ratio
equal to 1 then it is considered as good while below 1 is showing that the company’s current
assets (except inventory) may not be able to fulfill the debt obligations. Boeing has had a low
quick ratio in all the years but in the most recent year, the ratio has gone to a negative figure
which means that the chances for liquidity are increasing the company should take contingent
steps to overcome the issue. The negative ratio has also come due to the pandemic COVID-19
as a factor affecting the variable for Boeing (Berry-Johnson, 2021).
The last ratio in the table is the Cash Ratio which deals with the cash and cash equivalents in
the balance sheet of Boeing that the company has enough cash and cash equivalents to pay off
its short-term debt obligations. For the cash ratio, there is no ideal figure or range for it but the
cash ratio ranging from 0.5 to 1 is considered better for a company. Boeing has cash ratio of
0.10, 0.10, 0.09, 0.10, and 0.09 in 2016, 2017, 2018, 2019, and 2020. Boeing has maintained
its cash ratio the same in the five years except for a 1 percent decline in two years. This is a
good sign because if a company has more cash in their accounts it means the company is not
generating anything from the cash and it is useless in the bank accounts. We have also
represented the data of Boeing in a graph which will provide a clearer view of the Liquidity
ratios of the company (The Balancemb, 2021).
0.73 0.96 1.08 1.05 1.390.22 0.27 0.31 0.26
-8.82
0.10 0.10 0.09 0.10 0.09
2016 2017 2018 2019 2020
Liquidity Ratios
Current Ratio Current Assets/Current Liabilities
Quick Ratio (Current Assets - Inventory)/Current Liabilities
Cash Ratio Cash/Current Liabilities
4.2. Financial Leverage Ratios:
Every company has two types of funds available and invested in the operations of the company.
One is funds from shareholders and the other is from creditors. Financial leverage determines
how much of the capital is invested in the company and how much of it comes from debts. Also,
to look at the ability of the company whether it is meeting the financial obligations. We have
evaluated the financial leverage ratios of Bowing mentioned in the below table
(MyAccountingCourse, 2020):
Coming to the result of the first ratio calculated in the above table is the Total Debt Ratio. The
total debt ratio deals with finding the balance of debt in the total assets a company has. This
ratio varies from industry to industry especially with those companies that are intensive capital
industries that have higher debt ratios. A good total debt ratio is considered when the result
comes as 1 which means that the company has more debt than its assets. Coming to the values
of Boeing calculated above, that is 0.99, 0.99, 1.00, 1.06, and 1.12 in 2016, 2017, 2018, 2019,
and 2020 respectively. Boeing has a good total debt ratio in almost all the years (Debitoor,
2020).
Long term debt ratio determines the amount of long-term debt in comparison to the total assets
of a company in the books of accounts. a long-term ratio will be considered good when the
value comes less or equal to 0.5. In the above table the long-term debt ratio of Boeing is 0.97,
0.98, 0.99, 1.23, and 1.28 in 2016, 2017, 2018, 2019, and 2020 respectively. The result shows
that Boeing has more long-term debt as compared to the above range shared by us. But this is
not the case because Boeing is a manufacturer of heavy Aircraft and equipment so there may
be a chance that these heavy companies tend to have more leverage of long-term debt. If we
look at the result of the ratios above the company has increased the long-term debt in the
company or we can say that Boeing has injected funds into the company through long-term
debts. This can happen by multiple factors, but the global pandemic COVID-19 can also be a
major factor in it (Debitoor, 2020).
Financial Leverage Ratio
Formulas
2016
2017
2018
2019
2020
Total debt ratio
(Total Assets - Total Equity)/Total Assets
0.99
0.99
1.00
1.06
1.12
Long term debt ratio
Long-term debt/(Long term debt + total equity)
0.97
0.98
0.99
1.23
1.28
Times interest earned
EBIT/Interest
18.10
14.18
25.43
-2.13
-5.71
Cash coverage
(EBIT + depreciation)/Interest
23.62
19.20
29.88
1.02
-4.67
The next ratio in the table is Times interest earned ratio (TIE). This ratio evaluates the capability
of a company that it can meet its obligations of debts that are interest payments based on the
current income of Boeing. The TIE ratio can be calculated by dividing earnings before interest
and tax on the interest expense of a company (Wall Street Prep, 2020).
A good Times interest earned could be 2.5 or above because the risk is associated with it. If a
company has times interest earned ratio less than the above range, then there are chances for
the company to go bankrupt or instability. Boeing’s times interest earned ratio results are 18.10,
14.18, 25.43, -2.13, and -5.71 in 2016, 2017, 2018, 2019, and 2020 respectively. The company
has favorable results in three years while it has drastic results in two years with negative values.
There are high chances for Boeing to be unstable or even go bankrupt because they are not able
to pay off its interest obligations which is not a good sign for the company (Wall Street Prep,
2020).
The last ratio in the above table is the cash coverage ratio which is an accounting ratio that
refers to identifying the ability of a company by covering the interests only by cash. If yes, then
how much of the interest payments are covered by the company’s cash. This ratio also provides
indications of the financial health of the company. So, a good cash coverage ratio is at least 2
which reflects that the company has consistent revenues which will cover the interest
obligations and has good financial health. The result of Boeing after calculating the cash
coverage ratio is 23.62, 19.20, 29.88, 1.02, and -4.67 in 2016, 2017, 2018, 2019, and 2020
respectively. The results are favorable for the company except for the last two years where it
goes below 2 and in the next year the result is negative. As discussed above the company should
focus on its strategic decision to overcome the burden of debts and interest obligations. The
financial leverage ratios are also converted into graphs to have a more reliable view of the
information of Boeing (Girsch-Bock, 2020).
4.3. Asset Management Ratios:
The AMR is used to evaluate a company's sales and revenue efficiency. AM is a critical
component of every company's capacity to earn income. Because these ratios will assess
Boeing's efficiency and give planning challenges that must be addressed to preserve market
leadership and capital, they are also known as turnover ratios. This does not imply that the firm
should spend all of its money in assets or that it should invest nothing at all; rather, the
appropriate amount should be invested. Asset management ratios include total assets turnover
ratio, fixed assets turnover ratio, days sales in inventory, receivable turnover, days sales in
receivables, and inventory turnover. We looked at the Boeing AMR, which are listed in the
table below (Readyratios, 2018).
Asset Management Ratios
Formula
2016
2017
2018
2019
2020
Inventory turnover
COGS/Inventory
1.870
1.248
1.302
0.941
0.072
Day sales in inventory
365/Inventory turnover
374.93
444.32
483.32
4708.63
3017.25
Receivable turnover
Sales/Accounts Receivable
10.21
8.25
7.04
6.14
5.79
Days sales in receivables
365/Receivables turnover
61.86
77.90
70.93
77.65
108.46
Fixed assets turnover
Sales/Net Fixed Assets
7.38
7.42
8.00
6.12
4.92
Total assets turnover
Sales/Total Assets
1.05
0.84
0.86
0.57
0.38
Coming to the inventory turnover ratio. The purpose of the inventory turnover ratio is to identify
the efficiency of the inventory within the company and how it is managed. The inventory
turnover ratio is calculated by dividing the cost of goods sold by inventory in the company. We
-10.00
0.00
10.00
20.00
30.00
40.00
2016 2017 2018 2019 2020
Financial Leverage Ratio
Total debt ratio (Total Assets - Total Equity)/Total Assets
Long term debt ratio Long-term debt/(Long term debt + total equity)
Times interest earned EBIT/Interest
Cash coverage (EBIT + depreciation)/Interest
have calculated the inventory turnover ratio of Boeing for a period of five years that is 1.87,
1.25, 1.302, 0.94, and 0.0716 in 2016, 2017, 2018, 2019, and 2020 respectively. For big
industries, the range for the ideal ratio is 5-10 for those companies which produce perishable
products the ratio is higher than the above range. The results of the ratios of Boeing are less
than the range above which is not a bad sign for Boeing because the product produced by Boeing
is not for ordinary customers because of the heavy aircraft and equipment produced by the
company. So, the ratios above calculated are favorable but it has decreased in recent years so it
should be noted to overcome the factors that are affecting the inventory turnover (Jenkins,
2021).
Days Sales in Inventory refers to the metric analysis to identify the average days it takes for a
company to sell off the inventory produced. If the ratio is higher than it means that the company
is not managing the inventory well because it is sustained in the company while a low ratio will
indicate that the company is regularly selling its inventory and generating revenues. The above
table shows the days sales in the inventory of Boeing, which is 374.93, 444.32, 483.32, 4708.63,
3017.25 in five years from 2016 to 2020. The number of days inventory held at the business is
huge but being an aerospace company, it is difficult to easily sell the products because Boeing
has specific customer which includes private airline companies, private jets, and governments.
So, the days mentioned above are acceptable in the case of Boeing. But in recent years, it has
increased so much that it should be sorted out in priority (Indeed, 2020).
The next ratio is the table is the receivable turnover ratio which determines the efficiency of
Boeing in collecting the receivables or the collection of credits from its customers. This ratio
also indicated how many times the account receivables of Boeing are converted into cash.
Coming to the receivable turnover ratios calculated for Boeing for 5 years are 10.21, 8.25, 7.04,
6.14, and 5.79. The result is favorable for Boeing because the ideal ratio for the receivable
turnover is 7.8 which is almost achieved by Boeing (Jenkins, 2021).
Day’s sales in the receivable ratio are related to the receivable turnover ratio. This ratio indicates
how many days it takes to recover the amount of Receivables to cash. This ratio will provide
Boeing with an estimate of the receivables outstanding but not the units of currency. This ratio
has one of the significant places in the company’s financial analysis because there are risks
related to bad debts that can harm the revenue of the company. The ratio of days sales in
receivables varies from industry to industry but ideally when the number is below 45 then it is
considered favorable results of the ratios. Coming to the ratios calculated in the above table,
which are 61, 78, 71, 77, and 108 in 2016, 2017, 2018, 2019, and 2020 respectively. For an
aerospace company like Boeing, these scores are favorable for a smooth operation of Boeing in
the industry (Indeed, 2020).
Fixed Assets Turnover determines the efficiency of the fixed assets of Boeing in generating
sales from it. When the ratio is higher it is an indication that Boeing is utilizing their fixed assets
effectively. This does not mean that the company will be generating higher profits, but it talks
about the effective and efficient use of fixed assets in the company. The results calculated for
Boeing are 7.38, 7.42, 8, 6.12, and 4.92 in the 5 years from 2016 to 2020. The results of Boeing
are favorable among other competitors within the industry (Indeed, 2020).
Total Assets Turnover includes all the assets including fixed assets and current assets of Boeing.
This ratio determines the ratio of the total sales generated by Boeing to the average assets in the
company. It will identify the performance of the company in terms of large sales of the assets
and purchasing significant assets for a company. The formula of the total assets turnover ratio
is sales divided by total assets. Total Assets ratio of Boeing in 5 years are 1.05, 0.84, 0.86, 0.57,
and 0.38. We have also shown the graphical representation of the above table data which is
given below (Jenkins, 2021):
4.4. Profitability Ratios:
It is a financial ratio that determines the capabilities within the company to generate profits
from its sales mainly from operations, balance sheet, assets, and equity. Businesses work to
increase the wealth of the shareholders. For this purpose, profitability ratios are beneficial for
the shareholder to have an idea of the performance of the company regarding the profits. We
have summarized the financial data of Boeing’s profitability for 5 years with the help of the
following ratios (Study, 2019):
01000 2000 3000 4000 5000
Inventory turnover
Day sales in inventory
Receivable turnover
Days sales in receivables
Fixed assets turnover
Total assets turnover
Asset Management Ratios
2020 2019 2018 2017 2016
1. Profit Margin Ratio
2. Return on Assets (ROA)
3. Return on Equity (ROE)
The below table represents the ratios.
Profitability Ratios
Formula
2016
2017
2018
2019
2020
Profit margin
Net income/ Sales
0.051728
0.08991
0.10337
0.00831
0.20415
Return on assets (ROA)
Net income/Total assets
0.054357
0.07522
0.08907
0.00476
0.07804
Return on equity (ROE)
Net income/Total equity
5.122513
12.4294
25.4951
-0.0766
-0.6569
The profit Margin ratio determines the profit of the company left for the shareholders after all
the expenses have been paid. The ratio is calculated by dividing the net income by the sales of
the company. This ratio talks about how well the company is generating profits among the
competitors in the industry. From research, it has been revealed that the ideal ratio of Profit
margin lies between 5% to 10%. We have calculated the profit margin ratio for Boeing, which
is 0.051728, 0.08991, 0.10337, 0.00831, and 0.20415 in 2016, 2017, 2018, 2019, and 2020. The
results of Boeing in three years are ideal because of coming in the range above and the two
years performance is affected due to COVID-19 due to which the result is exaggerated (Bragg,
2022).
Return on Assets deals with the profitability of the company concerning its total asset. This
ratio helps Boeing to evaluate the performance of the company in terms of the investment of its
total assets. When the return on assets is higher it shows that the management of the company
is highly productive and efficient in generating sales by utilizing the resources of the company
effectively. We have calculated the ROA for Boeing, which is 0.054357, 0.07522, 0.08907,
0.00476 and 0.07804 in 2016, 2017, 2018, 2019, and 2020 respectively. The result shows that
Boeing has improved the return on assets over time which is a good sign of growth.
Return on equity is the hybrid ratio of income statement and balance sheet because the net
income of Boeing is compared with equity in the balance sheet. It is used to identify the annual
returns of Boeing by dividing net income by the value of equity. The other methods of deriving
return on equity are simply taking the retention rate and dividing it by the dividend growth rate
of a company. We have calculated the return on equity of Boeing for a period of five years
starting from 2016 to 2020 the results are 5.122513, 12.4294, 25.4951, -0.0766, and -0.6569.
the highest return on assets was in 2019 after which the company went into losses due to which
the ratio becomes negative. But sometimes negative ROE is not bad because it has come by
several reasons which include loss, high cost of improvements in business, restructuring.
Besides these, Boeing is an aerospace company so this can be a usual factor for this type of
industry, but we cannot neglect the fact that the company was affected by pandemic COVID-
19. We have also represented the profitability ratio graphically which is given below:
4.5. Market Value Measures:
Market Value measures are significant ratios for shareholders, management, and others. The
purpose of the market value measures ratio is to determine the condition of the company. There
are three conditions for a company to be in (Bragg, 2021):
1. Overvalued
2. Undervalued
3. At Par
-5
0
5
10
15
20
25
30
2016 2017 2018 2019 2020
Profitability Ratios
Profit margin Net income/ Sales
Return on assets (ROA) Net income/Total assets
Return on equity (ROE) Net income/Total equity
These conditions are in terms of stocks. Whenever an investor wants to buy stock of any
company, he/she usually does and prefers to perform market value analysis of the company like
market value measures. We have calculated the market value measures ratios of Boeing which
are described as follow:
Market value measures
Formula
2016
2017
2018
2019
2020
Earnings per share
Net income/number of shares outstanding
7.83
13.85
17.85
-1.12
-20.88
PE Ratio
Price per share/EPS
35.94
21.293
23.62
18.64
-191.1
The earnings per share ratio determine the ability of the company whether it will produce
earnings for shareholders. Earnings per share can be found by dividing net income by the
number of shares outstanding. The earning per share of Boeing is 7.83, 13.85, 17.85, -1.12, and
-20.88 in 2016, 2017, 2018, 2019, and 2020 respectively. Boeing has recorded the loss for two
consecutive years due to which the ratios are negative. Boeing is working to take steps to
overcome the loss that occurred in the last two years (TheBalanceMb, 2019).
Coming to the price to earnings ratio. This ratio is used to evaluate the company that whether
it is improving or not improving, overvalued, or undervalued, etc. the price to earnings ratio is
calculated by the share price of the company on the earning per share derived. In terms of price
to earnings ratio, there is no ideal range for it. While the current market average price to earnings
ratio is ranging from 20-to 25. When the price to earnings ratio is higher it means that you are
paying more dollars in response to each dollar earned. This can also be one of the strategies of
a company to sustain the shareholders in the company in case of loss. We have calculated the
price-to-earnings ratios of Boeing which are 35.93359, 21.2931, 23.6159, 18.642, and -191.13
in 2016, 2017, 2018, 2019, and 2020 respectively. We know that the company has made losses
in the current year as well as in the previous, but they have planned strategies to overcome the
losses. Besides these, Airlines companies have also started resuming their operations which is
directly related to the business operations of Boeing. In COVID-19 people stopped traveling
due to which airline companies were in loss and eventually Boeing also incurred a loss. Boeing
is one of the market-leading aerospace companies so, shareholders are required to stay calm
and hold their investments in the company because Boeing has come back into its operations
and soon it will make huge profits again. Here is the graphical representation of market value
measures ratios (Bragg, 2021).
5. Conclusion:
To conclude the thorough discussion on Boeing including the services provided by the
company, brief historic details, values, financial statements, financial analysis, and ratio
analysis of the company. We used numeric calculations and graphical representation to depict
the picture of the company at our best. We have analyzed the financial situation of the company
which showed that Boeing is one of the market leaders in the field of aerospace, information
technology, space shuttle, rockets, and weapons (TheBalanceMb, 2019). Boeing has expanded
its operations to more than 160 countries worldwide. There are main categories in which the
company is dealing which include commercial jetliners, BDS (Defense, Space & Security),
Services offered globally, and capital corporation. The main customer of the company is
commercial airplane companies, allied governments, military forces, NASA, and many other
companies. We have also observed that in recent years losses were incurred by the company.
The losses incurred by the company were because of the global pandemic COVID-19. Because
due to the pandemic people stopped traveling and commercial flights were banned due to which
commercial airplane companies incurred which eventually resulted in a loss for Boeing because
commercial airplane companies are its main customers. We have also suggested some solutions
to improve the financial performance in the current and upcoming years. To conclude the
discussion, it is known that Boeing is a big company with having a large workforce and have a
great brand name in the United States and different countries (TheBalanceMb, 2019).
-250
-200
-150
-100
-50
0
50
2016 2017 2018 2019 2020
Market Value Measures
Earnings per share Net income/number of shares outstanding
PE Ratio Price per share/EPS
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