Break Even Analysis (Remember your Algebra!!)
An airline company has Fixed Costs of $100 million and Variable Costs Per Unit of $2 million. Planes sell for $3 million each. What is the company’s breakeven point in terms of number of planes that need to be sold to break even?
1. If the airplane company wants to make a profit of $99 million annually, how many planes will it have to sell?
2. If the company can sell 200 planes in a year, how much annual profit will the form make?
2. I am an investor and I want to get into an industry. Problem is, I cannot decide which I’d rather invest in. Utilizing the financial data below analyze and compare the 2 years of data provided. Please use that information to advise me as to which company is in a better position…
BE DESCRIPTIVE AND SPECIFIC
GRADING SUMMARY:
1 Point for EACH financial ratio (60 Points total)
Working Capital
Current Ratio
Quick Ratio
Debt to Total Assets Ratio
Gross Profit Margin
Return on Total Assets (ROA)
Analysis of financial ratios (25 Points)
Break Even Analysis (15 Points)
|
Company A
|
|
In Millions
|
|
|
|
|
FINANCIAL INPUT
|
2010
|
2009
|
|
|
Net Income
|
$528
|
$555
|
|
|
Total Debt
|
$6,400
|
$5,589
|
|
|
Total Assets
|
$8,859
|
$8,776
|
|
|
Sales
|
$5,636
|
$5,531
|
|
|
Cogs
|
$2,243
|
$2,234
|
|
|
Current Assets
|
$1,309
|
$1,279
|
|
|
Current Liabilities
|
$1,338
|
$854
|
|
|
Inventory
|
$244
|
$262
|
|
|
Company B
|
|
In Millions
FINANCIAL INPUT
|
2010
|
2009
|
|
Net Income
|
$4,313
|
$3,609
|
|
Total Debt
|
$31,687
|
$29,383
|
|
Total Assets
|
$69,206
|
$63,117
|
|
Sales
|
$38,063
|
$36,149
|
|
Cogs
|
$31,337
|
$30,452
|
|
Current Assets
|
$12,225
|
$11,889
|
|
Current Liabilities
|
$11,000
|
$8,934
|
|
Inventory
|
$1,442
|
$1,271
|
|
PROFITABILITY RATIOS
|
|
|
|
|
Return on Assets (ROA)
|
=
|
Net Income
|
|
|
Total Assets
|
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
|
Gross Profit Margin
|
=
|
Sales - CoGS
|
|
|
Sales
|
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
|
LIQUIDITY RATIOS
|
|
|
|
|
Current Ratio
|
=
|
Current Assets
|
|
|
Current Liabilities
|
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
|
Quick Ratio
|
=
|
Current Assets - Inventory
|
|
Current Liabilities
|
| |
|
|
|
| |
|
|
|
|
Working Capital
|
=
|
Current Assets - Current Liabilities
|