8/13/2019 Analysis of Southwest Airlines
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Analysis of Southwest Airlines
Find the most recent Southwest Airlinesannual report, 10-K and
10-Qs on the Internet.Use the annual report, 10-K, the two 10-Qsfor
2011, 8-Ks, company announcements,
WSJarticles and any other data you find useful to do an analysis
of Southwest Airlines.
Prepare no more than a three-page (double-spaced, 12 point font,
normal margins) memoreporting the results of your analysis of this
company. Below I list six exhibits that you
must include. The memo should explain and interpret the
important information in these
exhibits. (Don't talk about a number, ratio or percentage unless
it is important for thereader's understanding of this company. When
you do talk about a number or ratio,
explain what it reveals about Southwest Airlines and don't just
say it has gone up or
down.) While you will certainly analyze all the financial
statements extensively, your
analysis would be incomplete if it only considered the financial
information on thecompany. Include non-financial information you
think is important in analyzing
Southwest Airlines, but keep the focus of your paper on analysis
of the financial
accounting information. The final paragraph of your memo should
recommend whetheror not a moderately risk averse potential investor
in his mid-20s with a long run
investing horizon should include Southwest Airlines in his
investment portfolio.
In preparing your analysis, the following material must be
included.
1. For each of the most recent 5 years, report the following
information: net income or
loss, basic and diluted EPS, and PE ratio at year end (use the
fiscal year end prices andthe earnings for the years to calculate
the PE ratios- and show me the numbers you use to
calculate the PE ratio). In addition, include the net income
reported for the first two
quarters of 2011. This is Exhibit One.
2. List each of the ratios on pages 538 and 539 of your textbook
and calculate these
ratios for Southwest Airlines for the 12/31/2010 and 12/31/2009
financial statements.
Include these as Exhibit Two. (I need to see the numbers you
used to calculate all ratios.For example, if you are calculating
the current ratio, you need to show me the current
assets for Southwest Airlines/current liabilities for Southwest
Airlines and the result.)
3. Choose no more than 10 ratios from Exhibit Two that you think
are critically
important in understanding Southwest Airlines. Compare those
with the same 10 ratios
for one of Southwest Airlines competitors. Note your team must
decide what ratios are
most important and what competitor should be used for the
comparison. This is Exhibit3.
4. Your textbook talks about common size financial statements
beginning on page 531.
Prepare common size income statements and balance sheets for
Southwest Airlines forthe12/31/2010 and 12/31/2009 financial
statements. Include these as Exhibit Four.
5. Calculate the market value of Southwest Airlines' common
stock at 12/31/2010 and12/31/2009. (Total market value of common
stock is the number of shares outstanding
