Accounting Turbulence at Boeing Case Study Analysis
The comparison analysis of Boeing and Airbus for the year 2016 had been performed in order to gain sight about the profitability aspects of different accounting approaches,which have been used by aforementioned companies. The analysis representsthat Boeing earned higherprofitability returns as compared to Airbus. The gross profit margin of Boeing is 35% and profit margin is 5%. On the other hand, Airbus gross profit margin is 19% and profit margin is 1%. (See appendix 1).Additionally, working capital yields positive balance of $12,354, which represents that Boeing is able to manage its day to day expense with the help of its working capital. However, Airbus is unable to meet its day to day operation’s requirements with the help of its available working capital, because working capital representing negative amount of $753. Furthermore, other cash flow and liquidity ratios of Boeing representing higher ratios as compared to the Airbus. The price to cash flow ratio of Airbus is greater than Boeing, which represents that Boeing share price is lower than Airbus, and its investors are afraid because ofdecrease inthe share price. (See appendix 2 & 3).
Recommendations
Laurie Pitcher is the Vice President of Eastport Management, and she is worried about the current prevailing situation faced by Boeing. After a thorough analysis of the case, it is recommended that Boeing should make all the related information and the financial profitability figures public in order to build investors’ satisfaction with regards to the Dreamliner 787. Dreamliner is an innovative product, which requirescontinuousimprovement. Here, it is recommended that Boeing should adopt Kaizen approach of continuous improvement. Set SMART goals along with the minimization of the risk of delays and develop a strategy to increasethe product’s demand. Both approaches are good and are yielding positive return, but program accounting is more appropriate as compared to the unit cost accounting, because it helps the companies to show higher returns by using DCP account.....................
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