Financial Boeing Company Report

Boeing Company works in the three main directions which are technology, aviation, and defence. This company has bee established by William Edward Boeing in 1916. During those years, it was called the Pacific Aero Products Company, and was situated located in Seattle, WDC. This company’s title was changed later to Boeing in the honor of its creator and founder. It developed its first airplane model in 1916. The first 51 sea-planes were bought by the United States Navy, at the time when America joined the First World War in 1917. This event set the first company’s financial success and brough it fame. Boeing has established an outstanding partnership with United States military sector (n. a., 2016). During the 1920s, this company still manufactured transport planes and military airplanes. However, the first aircraft to be developed for commerce, B-1, could not carry passengers. Instead, the company delivered emails, which made it win many delivery contracts. Due to its high demand, the company formed Boeing airline which after four years founded the United Airline. The demand for military airplanes declined when the World War II ended, resulting in the loss of the job for many of its employees. However, the company did not stop. Instead, it developed airlines that could fly over the Atlantic Ocean. Instead of using propellers, their airplanes would use turbofans to power them. In 1970, the company became bankrupt and let go of half of its employee. During this year the company did not receive any domestic order.

In the 1980s, Boeing started gaining its financial status, and by 1990, the company had fully recovered. Boeing marked the new millennium by developing a lighter and fuel-efficient plane. In 2011, Boeing signed its largest contract in the history of $21 billion, when Lion Air ordered 29737-900ER and 201 737 MAX (n. a., 2016). Over the years, the company has gained its reputation. Nowadays, the company operates in various countries such as England, Japan, and UAE, as well as, many other domestic companies. For 100 years, Boeing Company has created a high-quality aircraft. Its ability to collaborate with other businesses is what has largely contributed to keeping it relevant for that long (n. a., 2017).

Net Income Analysis

The following table shows the net income statement of Boeing, retrieved from NASDAQ (2017). The figures are in $ millions.

12/31/2016

9/30/2016

6/30/2016

3/31/2016

Total Revenues(Net Sales)

23,286.00

23,898.00

24,755.00

22,632.00

Cost of Goods Sold

19,464.00

19,904.00

22,325.00

19,097.00

Selling & Admin Expenses

916.00

854.00

709.00

834.00

Operating Income

2,183.00

2,282.00

-419.00

1,788.00

Interest Expense

79.00

81.00

73.00

73.00

Pretax Income

2,103.00

2,203.00

-479.00

1,741.00

Other Income

2.00

1.00

0.00

30.00

Net Income Be Extraordinary

N/A

N/A

N/A

N/A

Net Income

1,631.00

2,279.00

-234.00

1,219.00

Net income is the difference in total revenue and total expenses. Total revenue increased from March to May by 9.4%. However, from May to September it decreased by 3.5%, there was little change between the month of September and December. There was a rise of 17% in cost of goods sold between March and May. This was followed by a decrease of 10.8% in September. Operation income marked a significant decline of 123% in May, but in September and December, it rose by 644%. In addition, the pretax had a sharp drop in May, but it increased in September and December. While March had the highest number of other income that is 30, May had none. Between the month of December 2016, and September 2016, the Company’s net income declined from $2,279 million to $1631million, which is a 28.23% decrease. There was significance income decline between the month of March 2016 and June 2016 (1,219 to -234). This indicates a huge drop of 119.2%. There is a slight difference in interest expenses, an indication that it was not the cause of the net income decline. The reasons for the decline, therefore, could have been, the cost of the goods sold, and pretax income.

Assets and Liabilities Analysis

This table shows the cost of the asset and the liabilities for Boeing Co for the below noted financial year. The table was retrieved from NASDAQ (2017).

Assets

12/31/2016

9/30/2016

6/30/2016

3/31/2016

Cash & Short Term Investments

10,029.00

9,668.00

9,265.00

8,352.00

Receivables - Total

9,260.00

9,889.00

10,060.00

9,969.00

Inventories - Total

43,199.00

42,680.00

44,182.00

47,266.00

Total Current Assets

62,488.00

62,237.00

63,507.00

65,587.00

Net Property, Plant & Equipment

12,807.00

12,713.00

12,533.00

12,269.00

Total Assets

89,997.00

88,950.00

89,609.00

91,547.00

Liabilities

Accounts Payable

49,750.00

47,857.00

48,691.00

48,274.00

Debt in Current Liabilities

384.00

632.00

1,168.00

1,243.00

Total Current Liabilities

50,134.00

48,489.00

49,859.00

49,517.00

Long-Term Debt

9,568.00

9,824.00

9,847.00

8,721.00

Total Liabilities

89,180.00

86,861.00

89,024.00

87,504.00

Stockholder’s Equity

Minority Interest

60.00

61.00

62.00

63.00

Preferred Stock

N/A

N/A

N/A

N/A

Common Stock

5,061.00

5,061.00

5,061.00

5,061.00

Retained Earnings

40,714.00

40,641.00

38,362.00

39,975.00

Treasury Stock

-36,097.00

-35,763.00

-34,821.00

-32,939.00

Total Stockholders’ Equity

817.00

2,089.00

585.00

4,043.00

Total Liabilities and Stockholders’ Equity

89,997.00

88,950.00

89,609.00

91,547.00

A balance sheet is a financial statement that shows the evaluation of both liabilities and assets. It shows company worth. A liability is the amount of money that a company is required to pay in case the company bankrupts, whereas an asset is what the company possesses. The owners’ equity is what a company gets after all the liability has been deducted from the assets. Total assets are a summation of cash and short-term investment, total inventory, total receivable and, exclusive property. There was a decline of 2.1% in total assets in May, however, there was minimal change in the other months. The liabilities are a summation of account payable, long-term debt, and debt in current liabilities. Total liabilities increased by 1.7% in May, but in September it declined by 2.4 %, and in rose again by 2.7 % in December. In the table above, the total stockholders’ equity was at its peak during the month of March and declined in the month of June.

Fiscal Year

The fiscal year is the period that government or companies use for financial statement preparation and accounting purposes. A fiscal year can either be a calendar year for tax purposes. According to internal revenue service, this year can be at the start and end of any month but not December. Boeing fiscal year ends in January - December (NASDAQ, 2017).

Auditing Company Synopsis

Deloitte and Touche LLP, independent registered public accounting firms, are the firms responsible for the auditing of any kind in the Boeing Co (Boeing Co, 2017). They conduct their audit as per the Public Company Accounting Oversight Board. This is the board that sets standards and regulates inspections. Deloitte uses modern technology to do its audits.

Inventory Valuation

An audit is an independent and systematic examination of the accounts, the books, documents, legal records, and the vouchers of a company to acknowledge how both non-financial and financial statements disclose a fair and genuine view concern. Moreover, it ensures that account records are maintained well because it is a government requirement. An audit can help stakeholders in knowing the state of the company. In Boeing Company, inventoried cost and long-term contracts include engineering, tooling, and production. A value of location related to manufacturing is part of the inventory for the government. Inventory for commercial aircraft is made up of supplier and costs advances. Just like any other company, Boeing, experiences higher cost of production at the beginning of a program. The company reviews its inventory every three months. Used airplane and spare parts are stated as cost (Boeing, 2017)

Bad Debts Regarding Accounts Receivable

Bad debt also refers to account receivable that will no longer be received. Also, bad debt can refer to notes that are available but can no longer be collected. When it is about the account, bad debt is included on the income statement as uncollectible account expenses or as bad debt costs. It is the management of Boeing that determines allowance. Boing’s contributions are expressed as a ratio of accounts receivable over gross receivable. The allowance has been on the decline from 2015 to 2016 and from 2014 to 2015 (Boeing, 2017). Unlike losses, the seller should report contributions immediately. This will prevent taxation on credit lost. It is clear that the actual percentage used by Boeing is not known.

Depreciation Expense and Accumulated Depreciation

In calculating the amortization of any kind, a company considers the choices such as the usefulness of the asset, its cost, the value it shall have after it stopped working, and the predicted time when its value will no longer be as significant as it was when it was bought. Accumulated depreciation refers to the cumulative amount of discount up to some point in time. It, therefore, involves summing up all the values of depreciation since the inception of an organization. Comparing the company’s depreciation of its assets, between 2012 and 2015, the amount of depreciation had gone too high. This, however, is expected to change as necessary steps are being taken to curb it. In 2016, the company had a depreciation expense of $443 million. Compared to 2015, which had a depreciation expense of $459 million, the downward trend is expected to continue over the coming years. The accumulated depreciation saw an increase from June to September 2016. This was also witnessed between September and December 2016. The reduction keeps on accumulating over the years, leading to the huge figure as indicated in the chart below obtained from Wikinvest (n. a., 2017).

In conclusion, Boeing Company is considered one of the most successful airline companies. Its reputation is a result of dedication and hard work to provide quality to its customers. Boeing has marked one hundred years as number one airline company. The ability to partner with other enterprises that are outside the US has also contributed to its success over the years. The companies that give up quickly the moment they are bankrupt should learn from Boeing’s history. However, with the pressure from its competitors, the company seems to have, at some point, started to lose focus. The difference between its assets and liabilities is very marginal. That means, Boeing should continue to be innovative for it to stay at the top.

References

(n. a.). (2016). Boeing Thinks of Developing B737 MAX 10. Retrieved from https://www.aerotime.aero/en/civil/14293-boeing-thinks-of-developing-b737-max-10

(n. a.). (2017). Depreciation Expenses for Boeing Company (BA). Retrieved from http://www.wikinvest.com/stock/Boeing_Company_(BA)/Data/Depreciation_Expenses

Averkamp, H. (2017). What is the difference between depreciation expense and accumulated depreciation? Retrieved from https://www.accountingcoach.com/blog/what-is-the-difference-between-depreciation-expense-and-accumulated-depreciation

Boeing Co. (2014). The Boeing Company Audit Committee Charter. Retrieved from http://www.boeing.com/resources/boeingdotcom/company/general_info/pdf/Audit_Committee_Charter.pdf

Boeing Co. (2016). 10-K. Retrieved from https://www.sec.gov/Archives/edgar/data/12927/000001292716000099/a201512dec3110k.htm

Boeing Co. (2017). Analysis of Bad Debts. Retrieved from https://www.stock-analysis-on.net/NYSE/Company/Boeing-Co/Financial-Reporting-Quality/Bad-Debts

Boeing Co. (2017). Analysis of Inventory. Retrieved from https://www.stock-analysis-on.net/NYSE/Company/Boeing-Co/Analysis/Inventory

Gurufocus.(2017). Boeing Co (BA) Depreciation, Depletion and Amortization. Retrieved from http://www.gurufocus.com/term/CF_DDA/BA/Depreciation%252C%2BDepletion%2Band%2BAmortization/Boeing%2BCo

Innervoicebusiness. (2017). Boeing Blog Post #1. Retrieved from https://innervoicebusiness.wordpress.com/2017/02/02/boeing-blog-post-1/

NASDAQ. (2017). Boeing Company (The) (BA) Stock Report. Retrieved from http://www.nasdaq.com/symbol/ba/stock-report