Analysis of Annual Audited Report for Boeing Corporation Name of the Writer Professor T. Saracina MGMT 210 Financial Accounting Embury Riddle Aeronautical University Date Submitted Analysis of Annual Audited Report for Boeing Corporation Introduction Boeing is one of the world’s largest aerospace companies, defense contractors and aircraft manufacturers…
Over its eventful history, the company has been responsible for a number of innovations like the Boeing B-1, B-8 and Monomail, Model C, Boeing 80 and the 737. Boeing earned a profit of $4.018 billion for the year ended December 30, 2011 and had total assets of $79.986 billion on the same date. Since 2005, the company’s Chairman, President and CEO have been W. James McNerney Jr. The company has a total of 164,545 employees worldwide and the top 1.5 % of them go through the Technical Fellowship program, which sets the technical direction for the company. We will now move on to the analysis of Boeing’s financial statements as given in their Audited Annual Reports for 2011. Their accounts have been audited by Deloitte & Touche LLP, one of the Big Four accounting firms in the world. The report is unqualified and this means that Boeing Company has met the financial standards for record keeping and presentation as required by the FASB and other relevant authorities. Analysis of Net Income and Cash Flows According to the financial statements for the year ended 30 December 2011, Boeing has reported net income from sales of products and services for fiscal year 2011 of $ 4.018 billion. According to their Consolidated Statement of Cash Flows, cash provided from operating activities for 2011 was $5.844 billion (Boeing Annual Report 2011, 55). The difference between the two numbers can be explained on the basis of accrual accounting principles where revenue is recognized when it is earned and expenses are recognized when they are incurred (Porter & Curtis, 2013). Meigs, Meigs and Meigs further distinguish the importance of assessing operating activities through the measure of operating cash flow. Using accrual-based net earnings can lead to ambiguous performance indications, unless a company can convert its revenues/profits into cash (Meigs et al., 1995). Thus from a comparison of Boeing’s net earnings and net cash from operating activities in 2011, it can be concluded that the company is effectively converting their profits into cash. Ratio of Net Income to Net Revenue Looking further at the Consolidated Statement of Earnings, the following figures give a comparison of Boeing’s Net earnings to Net sales for the three years ending in December 2009, 2010 and 2011 respectively. All dollar amounts have been shown in millions: 2011 2010 2009 Net Earnings $4,018 $3,307 $1,312 Net Sales 68,735 64,306 68,281 Ratio 5.84% 5.14% 1.92% (Source: Boeing Annual Report, 2011) Wood and Sangster (2008) state that an efficient business is one who can keep the costs of providing their products or services relatively low compared to their selling price of those products or services. That said, the numbers in the above table are indicative of a fairly efficient business. While Boeing’s net sales had decreased from $68 billion in 2009 to $64 billion in 2010, yet the company managed to increase its net earnings from $1.3 billion to $3.3 billion over 2009-2010. The net sales and net earnings both show an increase in 2011 being $68 billion and $4 billion respectively so the company has once again done well Company Assets A further inspection of the Boeing Company’s Consolidated Balance Sheet for 2011 shows that their three largest assets are Inventories ($32.24 billion), Cash and cash equivalents ($10.049 billion), ...
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