Reformulation for Multi-Year Capitalization of Operating Leases ADJUSTMENTS 10.1 Use the information provided in Analyst Adjustments 10.1 for Southwest Airlines along with the information below to answer the requirements.

$ millions 2013 2014 2015 Net operating assets (NOA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,004 $ 6,479 $ 7,485 Net nonoperating obligations (NNO) . . . . . . . . . . . . . . . . . . . . . . . . . . (332) (296) 127 Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,336 6,775 7,358 Net nonoperating expense (NNE). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 63 51 Net operating profit after tax (NOPAT) . . . . . . . . . . . . . . . . . . . . . . . . . 818 1,199 2,232 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 754 1,136 2,181 Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,699 18,605 19,820 Required

a. Compute the following ratios using the unadjusted and the adjusted numbers for each year. For simplicity only, use year-end balances for NOA, NNO, and equity.

• Return on equity (ROE)

• Return on net operating assets (RNOA)

• Net operating profit margin (NOPM)

• Net operating asset turnover (NOAT)

• Financial leverage (FLEV)

b. Does the lease capitalization make a large difference in any of these ratios? Explain.