wk 3
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2016JulyRSampleAnswer.xlsxSouthwest Balance Sheet
| Southwest Airlines Company (LUV) | ||
| Consolidated Balance Sheet - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
| Current assets: | ||
| Cash and cash equivalents | $ 1,583 | $ 1,282 |
| Short-term investments | 1,468 | 1,706 |
| Accounts and other receivables | 474 | 365 |
| Inventories of parts and supplies, at cost | 311 | 342 |
| Prepaid expenses and other current assets | 188 | 232 |
| Total current assets | 4,024 | 3,927 |
| Property and equipment, at cost: | ||
| Flight equipment | 19,462 | 18,473 |
| Ground property and equipment | 3,219 | 2,853 |
| Deposits on flight equipment purchase contracts | 1,089 | 566 |
| Assets constructed for others | 915 | 621 |
| Property and equipment, at cost | 24,685 | 22,513 |
| Less allowance for depreciation and amortization | 9,084 | 8,221 |
| Property and equipment, net | 15,601 | 14,292 |
| Goodwill | 970 | 970 |
| Other assets | 717 | 534 |
| Total assets | 21,312 | 19,723 |
| Current liabilities: | ||
| Accounts payable | 1,188 | 1,203 |
| Accrued liabilities | 2,591 | 1,565 |
| Air traffic liability | 2,990 | 2,897 |
| Current maturities of long-term debt | 637 | 258 |
| Total current liabilities | 7,406 | 5,923 |
| Long-term debt less current maturities | 2,541 | 2,434 |
| Deferred income taxes | 2,490 | 2,782 |
| Construction obligation | 757 | 554 |
| Other noncurrent liabilities | 760 | 1,255 |
| Stockholders' equity: | ||
| Common stock, $1.00 par value: 2,000,000,000 shares authorized; 807,611,634 shares issued in 2015 and 2014 | 808 | 808 |
| Capital in excess of par value | 1,374 | 1,315 |
| Retained earnings | 9,409 | 7,416 |
| Accumulated Other Comprehensive Income (Loss), Net of Tax | (1,051) | (738) |
| Treasury stock, at cost: 160,010,017 and 132,017,550 shares in 2015 and 2014 respectively | (3,182) | (2,026) |
| Total stockholders' equity | 7,358 | 6,775 |
| Total liabilities and stockholders' equity | $ 21,312 | $ 19,723 |
Southwest Air Income Statement
| Southwest Airlines Co (LUV) | ||||||
| Consolidated Statement of Income - USD ($) $ in Millions | 12 Months Ended | |||||
| 12/31/15 | 12/31/14 | 12/31/13 | % change from Previous year 14 | % change from Previous year 13 | ||
| OPERATING REVENUES: | ||||||
| Passenger | $ 18,299 | $ 17,658 | $ 16,721 | 3.6% | 5.6% | |
| Freight | 179 | 175 | 164 | 2.3% | 6.7% | |
| Special revenue adjustment | 172 | 0 | 0 | |||
| Other | 1,170 | 772 | 814 | 51.6% | -5.2% | |
| Total operating revenues | 19,820 | 18,605 | 17,699 | 6.5% | 5.1% | |
| OPERATING EXPENSES: | ||||||
| Salaries, wages, and benefits | 6,383 | 5,434 | 5,035 | 17.5% | 7.9% | |
| Fuel and oil | 3,616 | 5,293 | 5,763 | -31.7% | -8.2% | |
| Maintenance materials and repairs | 1,005 | 978 | 1,080 | 2.8% | -9.4% | |
| Aircraft rentals | 238 | 295 | 361 | -19.3% | -18.3% | |
| Landing fees and other rentals | 1,166 | 1,111 | 1,103 | 5.0% | 0.7% | |
| Depreciation and amortization | 1,015 | 938 | 867 | 8.2% | 8.2% | |
| Acquisition and integration | 39 | 126 | 86 | -69.0% | 46.5% | |
| Other operating expenses | 2,242 | 2,205 | 2,126 | 1.7% | 3.7% | |
| Total operating expenses | 15,704 | 16,380 | 16,421 | -4.1% | -0.2% | |
| OPERATING INCOME | 4,116 | 2,225 | 1,278 | 85.0% | 74.1% | |
| OTHER EXPENSES (INCOME): | ||||||
| Interest expense | 121 | 130 | 131 | -6.9% | -0.8% | |
| Interest Costs Capitalized Adjustment | (31) | (23) | (24) | 34.8% | -4.2% | |
| Interest income | (9) | (7) | (6) | 28.6% | 16.7% | |
| Other (gains) losses, net | 556 | 309 | (32) | 79.9% | -1065.6% | |
| Total other expenses (income) | 637 | 409 | 69 | 55.7% | 492.8% | |
| INCOME BEFORE INCOME TAXES | 3,479 | 1,816 | 1,209 | 91.6% | 50.2% | |
| PROVISION FOR INCOME TAXES | 1,298 | 680 | 455 | 90.9% | 49.5% | |
| NET INCOME | $ 2,181 | $ 1,136 | $ 754 | 92.0% | 50.7% | |
| NET INCOME PER SHARE, BASIC (in dollars per share) | $ 3.30 | $ 1.65 | $ 1.06 | 100.0% | 55.7% | |
| NET INCOME PER SHARE, DILUTED (in dollars per share) | 3.27 | 1.64 | 1.05 | 99.4% | 56.2% | |
| Cash dividends declared per common share (in dollars per share) | $ 0.2850 | $ 0.2200 | $ 0.1300 | 29.5% | 69.2% | |
| Calculated Profit Margin | 11.0% | 6.1% | 4.3% | 43.3% |
Southwest Cash Flow
| Southwest Airline Company (LUV) | |||
| Consolidated Statement of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
| Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||
| Net income | 2181 | $ 1,136 | $ 754 |
| Adjustments to reconcile net income to cash provided by operating activities: | |||
| Depreciation and amortization | 1015 | 938 | 867 |
| Unrealized (gain) loss on fuel derivative instruments | 113 | 279 | (5) |
| Deferred income taxes | (109) | 501 | 50 |
| Changes in certain assets and liabilities: | |||
| Accounts and other receivables | (88) | 54 | (17) |
| Other assets | 103 | 142 | (46) |
| Accounts payable and accrued liabilities | 961 | 36 | 343 |
| Air traffic liability | 94 | 326 | 400 |
| Cash collateral received from (provided to) derivative counterparties | (570) | (233) | 57 |
| Other, net | (462) | (277) | 74 |
| Net cash provided by operating activities | 3238 | 2902 | 2477 |
| Net cash used in investing activities | |||
| Capital expenditures | (2,041) | (1,748) | (1,433) |
| Assets constructed for others | (102) | (80) | (14) |
| Purchases of short-term investments | (1,986) | (3,080) | (3,135) |
| Proceeds from sales of short-term and other investments | 2,223 | 3,185 | 3,198 |
| Other, net | (7) | (4) | 0 |
| Net cash used in investing activities | -1913 | (1,727) | (1,384) |
| Net cash used in financing activities | |||
| Proceeds from issuance of long-term debt | 500 | 300 | 0 |
| Proceeds from Employee stock plans | 46 | 110 | 96 |
| Reimbursement for assets constructed for others | 24 | 27 | 0 |
| Proceeds from termination of interest rate derivative instrument | 12 | 0 | 0 |
| Payments of long-term debt and capital lease obligations | (213) | (561) | (313) |
| Payments of cash dividends | (180) | (139) | (71) |
| Repayment of construction obligation | (10) | (11) | (5) |
| Repurchase of common stock | (1,180) | (955) | (540) |
| Other, net | (23) | (19) | (18) |
| Net cash used in financing activities | (1,024) | (1,248) | (851) |
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 301 | (73) | 242 |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 1,282 | 1,355 | 1,113 |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 1,583 | 1,282 | 1,355 |
| CASH PAYMENTS FOR: | |||
| Interest | 105 | 128 | 133 |
| Income taxes | 1,440 | 155 | 346 |
| SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: | |||
| Flight equipment under capital leases | 193 | 153 | 26 |
| Assets constructed for others | $ 192 | $ 88 | $ 105 |
Jet Blue Balance Sheet
| JETBLUE AIRWAYS CORP (JBLU) | ||
| Consolidated Balance Sheets - USD ($) $ in Millions | Dec. 31, 2015 | Dec. 31, 2014 |
| CURRENT ASSETS | ||
| Cash and cash equivalents | $ 318 | $ 341 |
| Investment securities | 558 | 367 |
| Receivables, less allowance (2015-$6; 2014-$6) | 136 | 136 |
| Inventories, less allowance (2015-$10; 2014-$8) | 44 | 46 |
| Prepaid expenses | 172 | 136 |
| Deferred income taxes | 145 | 174 |
| Total current assets | 1,373 | 1,200 |
| PROPERTY AND EQUIPMENT | ||
| Flight equipment | 7,079 | 6,233 |
| Predelivery deposits for flight equipment | 171 | 207 |
| Flight equipment, gross plus deposits | 7,250 | 6,440 |
| Less accumulated depreciation | 1,573 | 1,354 |
| Flight equipment net | 5,677 | 5,086 |
| Other property and equipment | 868 | 816 |
| Less accumulated depreciation | 293 | 252 |
| Property plant and equipment other net | 575 | 564 |
| Assets constructed for others | 561 | 561 |
| Less accumulated depreciation | 161 | 139 |
| Asset constructed for others net | 400 | 422 |
| Total property and equipment, net | 6,652 | 6,072 |
| OTHER ASSETS | ||
| Investment securities | 49 | 60 |
| Restricted cash | 63 | 61 |
| Other | 523 | 446 |
| Total other assets | 635 | 567 |
| TOTAL ASSETS | 8,660 | 7,839 |
| CURRENT LIABILITIES | ||
| Accounts payable | 205 | 208 |
| Air traffic liability | 1,053 | 973 |
| Accrued salaries, wages and benefits | 302 | 203 |
| Other accrued liabilities | 267 | 287 |
| Current maturities of long-term debt and capital leases | 448 | 265 |
| Total current liabilities | 2,275 | 1,936 |
| LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS | 1,395 | 1,968 |
| CONSTRUCTION OBLIGATION | 472 | 487 |
| DEFERRED TAXES AND OTHER LIABILITIES | ||
| Deferred income taxes | 1,218 | 832 |
| Other | 90 | 87 |
| Total deferred taxes and other liabilities | $ 1,308 | $ 919 |
| COMMITMENTS AND CONTINGENCIES (Notes 10 & 11) | ||
| STOCKHOLDERS’ EQUITY | ||
| Preferred stock, $0.01 par value; 25 shares authorized, none issued | $ 0 | $ 0 |
| Common stock, $0.01 par value; 900 shares authorized, 392 and 369 shares issued and 322 and 310 shares outstanding at 2015 and 2014, respectively | 4 | 4 |
| Treasury stock, at cost; 70 and 59 shares at 2015 and 2014, respectively | (366) | (125) |
| Additional paid-in capital | 1,896 | 1,711 |
| Retained earnings | 1,679 | 1,002 |
| Accumulated other comprehensive loss | (3) | (63) |
| Total stockholders’ equity | 3,210 | 2,529 |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 8,660 | $ 7,839 |
Jet Blue Income Statement
| JETBLUE AIRWAYS CORP (JBLU) | ||||||
| Consolidated Statements of Operations - USD ($) $ in Millions | 12 Months Ended | |||||
| Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | % change from previous Year 14 | % change from previous Year 13 | ||
| OPERATING REVENUES | ||||||
| Passenger | $ 5,893 | $ 5,343 | $ 4,971 | 10.3% | 7.5% | |
| Other | 523 | 474 | 470 | 10.3% | 0.9% | |
| Total operating revenues | 6,416 | 5,817 | 5,441 | 10.3% | 6.9% | |
| OPERATING EXPENSES | ||||||
| Aircraft fuel and related taxes | 1,348 | 1,912 | 1,899 | -29.5% | 0.7% | |
| Salaries, wages and benefits | 1,540 | 1,294 | 1,135 | 19.0% | 14.0% | |
| Landing fees and other rents | 342 | 321 | 305 | 6.5% | 5.2% | |
| Depreciation and amortization | 345 | 320 | 290 | 7.8% | 10.3% | |
| Aircraft rent | 122 | 124 | 128 | -1.6% | -3.1% | |
| Sales and marketing | 264 | 231 | 223 | 14.3% | 3.6% | |
| Maintenance, materials and repairs | 490 | 418 | 432 | 17.2% | -3.2% | |
| Other operating expenses | 749 | 682 | 601 | 9.8% | 13.5% | |
| Total operating expenses | 5,200 | 5,302 | 5,013 | -1.9% | 5.8% | |
| OPERATING INCOME | 1,216 | 515 | 428 | 136.1% | 20.3% | |
| OTHER INCOME (EXPENSE) | ||||||
| Interest expense | (128) | (148) | (161) | -13.5% | -8.1% | |
| Capitalized interest | 8 | 14 | 13 | -42.9% | 7.7% | |
| Interest income (expense) and other | 1 | 1 | (1) | 0.0% | -200.0% | |
| Gain (Loss) on Disposition of Assets | 0 | 241 | 0 | -100.0% | ||
| Total other income (expense) | (119) | 108 | (149) | -210.2% | -172.5% | |
| INCOME BEFORE INCOME TAXES | 1,097 | 623 | 279 | 76.1% | 123.3% | |
| Income tax expense | 420 | 222 | 111 | 89.2% | 100.0% | |
| NET INCOME | $ 677 | $ 401 | $ 168 | 68.8% | 138.7% | |
| EARNINGS PER COMMON SHARE | ||||||
| Basic | $ 2.15 | $ 1.36 | $ 0.59 | 58.1% | 130.5% | |
| Diluted | $ 1.98 | $ 1.19 | $ 0.52 | 66.4% | 128.8% |
Jet Blue Cash Flow Statement
| Jet Blue Airlines Co. (JBLU) | |||
| Consolidated Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
| Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | |||
| Net income | $ 677 | $ 401 | $ 168 |
| Adjustments to reconcile net income to net cash provided by operating activities: | |||
| Deferred income taxes | 377 | 212 | 107 |
| Depreciation | 288 | 263 | 258 |
| Amortization | 57 | 62 | 48 |
| Stock-based compensation | 20 | 20 | 14 |
| Gains on sale of assets, debt extinguishment and customer contract termination | (11) | 0 | (1) |
| Gain on sale of subsidiary | 0 | (241) | 0 |
| Collateral returned (paid) for derivative instruments | 52 | (49) | 8 |
| Changes in certain operating assets and liabilities: | |||
| Decrease (increase) in receivables | 11 | 1 | (22) |
| (Increase) decrease in inventories, prepaid and other | 5 | (3) | 23 |
| Increase in air traffic liability | 80 | 148 | 132 |
| (Decrease) increase in accounts payable and other accrued liabilities | 64 | 68 | 52 |
| Other, net | (12) | 24 | 17 |
| Net cash provided by operating activities | 1,598 | 912 | 758 |
| CASH FLOWS FROM INVESTING ACTIVITIES | |||
| Capital expenditures | (837) | (730) | (615) |
| Predelivery deposits for flight equipment | (104) | (127) | (22) |
| Proceeds from sale of subsidiary | 0 | 393 | 0 |
| Purchase of held-to-maturity investments | (370) | (361) | (234) |
| Proceeds from the maturities of held-to-maturity investments | 313 | 379 | 300 |
| Purchase of available-for-sale securities | (372) | (335) | (413) |
| Proceeds from the sale of available-for-sale securities | 242 | 398 | 508 |
| Other, net | 6 | (4) | 0 |
| Net cash used in investing activities | (1,134) | (379) | (476) |
| Proceeds from: | |||
| Issuance of common stock | 84 | 41 | 10 |
| Issuance of long-term debt | 0 | 342 | 393 |
| Short-term borrowings and lines of credit | 0 | 0 | 190 |
| Repayment of: | |||
| Long-term debt and capital lease obligations | (328) | (702) | (612) |
| Short-term borrowings and lines of credit | 0 | 0 | (190) |
| Acquisition of treasury stock | (241) | (82) | (8) |
| Other, net | (2) | (16) | (22) |
| Net cash used in financing activities | (487) | (417) | (239) |
| (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (23) | 116 | 43 |
| Cash and cash equivalents at beginning of period | 341 | 225 | 182 |
| Cash and cash equivalents at end of period | $ 318 | $ 341 | $ 225 |
Comparison of ratios
| Comparison of ratios | Southwest | Jet Blue | ||||
| 2015 | 2014 | 2015 | 2014 | |||
| Return on Equity (ROE) | ||||||
| Net Income | $2,181 | $1,136 | $677 | $401 | ||
| Total Stockholders Equity | $7,358 | $6,775 | $3,210 | $2,529 | ||
| Ratio | 29.6% | 16.8% | 21.1% | 15.9% | ||
| DuPont Components | ||||||
| Profit Margin | ||||||
| Net Income | $2,181 | $1,136 | $677 | $401 | ||
| Revenue | $19,820 | $18,605 | $6,416 | $5,817 | ||
| Net Inc. / Sales | 11.0% | 6.1% | 10.6% | 6.9% | ||
| Total Asset Turnover (TATO) | ||||||
| Sales or Revenue | $19,820 | $18,605 | $6,416 | $5,817 | ||
| Total Assets | $21,312 | $19,723 | $8,660 | $7,839 | ||
| Sales / Assets | 93.0% | 94.3% | 74.1% | 74.2% | ||
| Equity Multiplier | ||||||
| Total Assets | $21,312 | $19,723 | $8,660 | $7,839 | ||
| Total Stockholders Equity | $7,358 | $6,775 | $3,210 | $2,529 | ||
| TA / E | 2.90 | 2.91 | 2.70 | 3.10 | ||
| Check calculations in DuPont Formula | ||||||
| Multiply | ||||||
| line 12 | 11.0% | 6.1% | 10.6% | 6.9% | ||
| line 18 | 93.0% | 94.3% | 74.1% | 74.2% | ||
| line 24 | 2.90 | 2.91 | 2.70 | 3.10 | ||
| Multiply | 29.6% | 16.8% | 21.1% | 15.9% | ||
| ROE Line 6 | 29.6% | 16.8% | 21.1% | 15.9% | ||
| Profitability Ratios | ||||||
| Return on Equity | ||||||
| Net Income | $2,181 | $1,136 | $677 | $401 | ||
| Total Stockholder Equity | $7,358 | $6,775 | $3,210 | $2,529 | ||
| ROE | 29.6% | 16.8% | 21.1% | 15.9% | ||
| Return on Assets (ROA) | ||||||
| Net Income | $2,181 | $1,136 | $677 | $401 | ||
| Total Assets | $21,312 | $19,723 | $8,660 | $7,839 | ||
| ROA | 10.2% | 5.8% | 7.8% | 5.1% | ||
| Raw Earning Power | ||||||
| EBIT / Operating Income | $4,116 | $2,225 | $1,216 | $515 | ||
| Current Maturities of Long Term Debt | $637 | $258 | $448 | $265 | ||
| Long-term debt less current maturities | $2,541 | $2,434 | $1,395 | $1,968 | ||
| Total Stockholder Equity | $7,358 | $6,775 | $3,210 | $2,529 | ||
| LT Debt + Equity | $10,536 | $9,467 | $5,053 | $4,762 | ||
| Raw Earning Power | 39.1% | 23.5% | 24.1% | 10.8% | ||
| Profit Margin | ||||||
| Net Income | $2,181 | $1,136 | $677 | $401 | ||
| Sales of Revenue | $19,820 | $18,605 | $6,416 | $5,817 | ||
| NI / SA | 11.0% | 6.1% | 10.6% | 6.9% | ||
| Gross Profit Ratio | ||||||
| Not applicable | ||||||
| SG &A / Sales | ||||||
| Not Applicable | ||||||
| EBIT / Sales | ||||||
| EBIT / Operating Income | $4,116 | $2,225 | $1,216 | $515 | ||
| Sales / Revenue | $19,820 | $18,605 | $6,416 | $5,817 | ||
| EBIT / Sales | 20.8% | 12.0% | 19.0% | 8.9% | ||
| Liquidity Ratios | ||||||
| Quick Ratio | ||||||
| Current Assets (CA) | $4,024 | $3,927 | $1,373 | $1,200 | ||
| Minus Inventory | $311 | $342 | $44 | $46 | ||
| CA - INV | $3,713 | $3,585 | $1,329 | $1,154 | ||
| Current Liabilities | $7,406 | $5,923 | $2,275 | $1,936 | ||
| Quick Ratio | 50.1% | 60.5% | 58.4% | 59.6% | ||
| Current Ratio | ||||||
| Current Assets | $4,024 | $3,927 | $1,373 | $1,200 | ||
| Current Liabilities | $7,406 | $5,923 | $2,275 | $1,936 | ||
| Current Ratio | 54.3% | 66.3% | 60.4% | 62.0% | ||
| Accounts Receivable Turnover | ||||||
| Revenue | $19,820 | $18,605 | $6,416 | $5,817 | ||
| Accounts Receivable | $474 | $365 | $136 | $136 | ||
| Accounts Receivable Turn | 42 | 51 | 47 | 43 | ||
| Days Accounts Receivables | ||||||
| 360 | 360 | 360 | 360 | 360 | ||
| Receivables Turnover | 42 | 51 | 47 | 43 | ||
| Days Receivables | 9 | 7 | 8 | 8 | ||
| Inventory Turnover | ||||||
| Cost of Goods Sold | ||||||
| Use Total Operating Expense | $15,704 | $16,380 | $5,200 | $5,302 | ||
| Inventory | $311 | $342 | $44 | $46 | ||
| Inventory Turnover | 50.5 | 47.9 | 118.2 | 115.3 | ||
| Days Inventory | ||||||
| 360 | 360 | 360 | 360 | 360 | ||
| Inventory Turnover | 50.5 | 47.9 | 118.2 | 115.3 | ||
| Days Inventory | 7.1 | 7.5 | 3.0 | 3.1 | ||
| Cash Flow Ratios | ||||||
| Cash from Operations / Net Income | ||||||
| Net cash provided by operating activities | $3,238 | $2,902 | $1,598 | $912 | ||
| Net Income | $2,181 | $1,136 | $677 | $401 | ||
| Ratio | 148.5% | 255.5% | 236.0% | 227.4% | ||
| Cash from Operations / Cash used for Investing | ||||||
| Net cash provided by operating activities | 3238 | 2902 | $1,598 | $912 | ||
| Net cash used in investing activities | -1913 | -1727 | -$1,134 | -$379 | ||
| Ratio | -169% | -168% | -141% | -241% | ||
| Debt & Leverage | ||||||
| Debt / (Debt + Equity) | ||||||
| (will use in week 5) | ||||||
| Current Maturities of Long Term Debt and Capital Leases | $637 | $258 | 448 | 265 | ||
| Long Term Debt less current maturities | $2,541 | $2,434 | $1,395 | $1,968 | ||
| Debt (Add) | $3,178 | $2,692 | $1,843 | $2,233 | ||
| Total Stockholder Equity | $7,358 | $6,775 | 3,210 | 2,529 | ||
| Debt + Equity | $10,536 | $9,467 | $5,053 | $4,762 | ||
| Debt / (Debt + Equity) | 30.2% | 28.4% | 36.5% | 46.9% | ||
| Equity Multiplier | ||||||
| From DuPont Formula above | ||||||
| Total Assets | $21,312 | $19,723 | $8,660 | $7,839 | ||
| Total Stockholder Equity | $7,358 | $6,775 | $3,210 | $2,529 | ||
| Equity Multiplier | 2.90 | 2.91 | 2.70 | 3.10 | ||
| Debt / Total Assets | ||||||
| Current Maturities of Long Term Debt and Capital Leases | $637 | $258 | $448 | $265 | ||
| Long Term Debt less current maturities | $2,541 | $2,434 | $1,395 | $1,968 | ||
| Debt (Add) | $3,178 | $2,692 | $1,843 | $2,233 | ||
| Total Assets | $21,312 | $19,723 | $8,660 | $7,839 | ||
| Debt / Total Assets | 15% | 14% | 21% | 28% | ||
| Debt / Equity | ||||||
| Current Maturities of Long Term Debt and Capital Leases | $637 | $258 | $448 | $265 | ||
| Long Term Debt less current maturities | $2,541 | $2,434 | $1,395 | $1,968 | ||
| Debt (Add) | $3,178 | $2,692 | $1,843 | $2,233 | ||
| Total Stockholder's Equity | $7,358 | $6,775 | $3,210 | $2,529 | ||
| Debt / Equity | 43% | 40% | 57% | 88% | ||
| Times Interest Earned | ||||||
| Earnings Before Interest & Taxes (EBIT) Operating Income | $4,116 | $2,225 | $1,216 | $515 | ||
| Interest | $121 | $130 | $128 | $148 | ||
| EBIT / Interest | 34.0 | 17.1 | 9.5 | 3.5 | ||
| Times Interest Earned using EBITDA | ||||||
| Earnings Before Interest & Taxes (EBIT) Operating Income | $4,116 | $2,225 | $1,216 | $515 | ||
| Depreciation & Amortization | $1,015 | $938 | $345 | $320 | ||
| Total EBITDA | $5,131 | $3,163 | $1,561 | $835 | ||
| Interest | $121 | $130 | $128 | $148 | ||
| EBITDA / Interest | 42.4 | 24.3 | 12.2 | 5.6 | ||
| Stock Market Price Ratios | ||||||
| P/E Ratio | ||||||
| Stock Price June 27, 2016 | $36.76 | $15.15 | ||||
| Earnings per share (EPS) | $3.40 | $2.16 | ||||
| Price Earnings Ratio P/E | 10.81 | 7.01 | ||||
| P/E from Yahoo Summary Page | 10.82 | 7.01 | ||||
| Market / Book Ratio | ||||||
| Using Total Market Value | ||||||
| Market Cap. In Billions | $23.48 | $4.88 | ||||
| Total Stockholder Equity in millions | $7,358 | $3,210 | ||||
| Total Stock Holder Equity in Billions | $7.36 | $3.21 | ||||
| Market / Book Ratio calculated | 3.19 | 1.52 | ||||
| Price / Book from Yahoo | 3.26 | 1.46 | ||||
| Growth | ||||||
| Current Year Revenue | $19,820 | $18,605 | $6,416 | $5,817 | ||
| Previous Year Revenue | $18,605 | $17,699 | $5,817 | $5,441 | ||
| % Year over Year Growth | 6.5% | 5.1% | 10.3% | 6.9% | ||
| Current Year Net Income | $2,181 | $1,136 | $677 | $401 | ||
| Previous Net Income | $1,136 | $754 | $401 | $168 | ||
| % Year over Year Growth | 92.0% | 50.7% | 68.8% | 138.7% | ||
| BETA | 1.28 | 0.58 |
The Net Income came from the income statement and stockholders equity came from the balance sheet. The ratio is Net Income divided by Equity. It was very good for both. Both companies have significant amounts of Treasury Stock which reduced the amount of Stockholder equity and increased this ratio. Southwest has the higher ratios.
The profit margin in Net Income divided by Revenue. Both companies are have similar results. Since the companies are low priced airlines, we would expect this ratio to be below traditional airlines. Southwest is slightly higher in 2015 but lower in 2014.
TATO is Sales / Assets. You can hold your cursor over the numbers and see the source. Southwest generates more revenue per dollar of assets. Both companies are capital intensive as it takes significant assets to do business.
The equity multiplier shows how much of other people's money the company uses. The higher the number the more the company is "leveraged." Again Southwest is slightly ahead in 2015 but lower in 2014.
Our check shows that are calculations are correct. Here we can also see that Southwest comes ahead of Jet Blue primarily because it does a better job of using its assets to generate revenue, TATO is higher. In 2015 Southwest was ahead on all 3 components of the DuPont Formula.
This is the same as the ROE ratio in the DuPont Formula and the answers are the same as above. The student can fill in the explanations of what was done and what it means.
The student can fill in the explanations of what was done and what it means.
A business must have enough cash to meet its needs. Usually this is generated from operations. In week 2, we saw that the cash flow statements starts with cash from operations and in recent years, this provides most or all of the cash for many companies
The student can fill in the explanations of what was done and what it means.
The current ratio is low because neither company has significant amounts of inventory or receivables. This is because the companies are in a service business where customers pay in advance. The ratios are OK for the industry.
This ratio does not make sense for an airline or service industry that requires payment in advance for most services. It is included only as an example of the calculation.
This ratio does not make sense for an airline or service industry that requires payment in advance for most of its services. It is included only as an example of the calculation.
This ratio does not make sense for an airline or service industry. It is included only as an example of the calculation.
This ratio does not make sense for an airline or service industry. It is included only as an example of the calculation.
In Practice, there are many variations. We should different ways to cover the subject. All debt ratios convey similar information and it is not necessary to calculate all debt ratios.
The student can fill in the explanations of what was done and what it means.
The student can fill in the explanations of what was done and what it means.
The student can fill in the explanations of what was done and what it means.
The student can fill in the explanations of what was done and what it means.
Note: On the Southwest Income statement there are lines for Other Expense (Income). On the Jet Blue Income statement there are lines for Other Income (Expense) In the Southwest Case, Interest expense was shown as a positive number. In the Jet Blue case, Interest expense is shown as a negative number with ( ) around it. It was necessary to multiply the Jet Blue interest Expense by -1 to get comparable ratios
Note: In the case of Southwest, the calculation ignores interest income and capitalized interest.
Data Retrieved From Yahoo Finance June 27, 2016, Summary page
Market Cap from Summary page in Yahoo Finance. Price / Book from Key Statistics page in Yahoo Finance. Yahoo Price to Book from Most recent quarterly data. Calculations from Year end 12/31/ 2015 data.
P/E calculated from stock price and EPS. Notice slight difference due to rounding.
The student can provide the explanation
Note: Net cash used in investing activities is negative as this is a cash outflow. Both companies were able to finance all investing activities from cash from operations.
Raw earning power shows the capability of the company to earn profits regardless of how the company is financed.
This is the same as the first ratio in the DuPont Formula and the answers are the same as above. The student can fill in the explanations of what was done and what it means.
These ratios don't apply to airline companies
The student can supply explanations of what was done and what the answers mean for management.
In Summary, The calculations showed that Southwest Airlines has higher profits, ROE and generally better ratios than Jet Blue. Both companies have shown strong results overall. Please write 3 paragraphs here about what was learned.
% year over year growth was the current year divided by the previous year minus 1 expressed as a percentage. Jet Blue was growing faster
The student can describe how the calculation was made and what the results mean.
Explanations
Southwest Beta on July 1, 2016 from https://finance.yahoo.com/q?s=luv&ql=1 Jet Blue Beta on July 1, 2016 from https://finance.yahoo.com/q?s=JBLU&ql=0 Average risk is beta of 1. Jet Blue is below average risk. Southwest is above average risk.
