Ratio Analysis Find and download the “Profi tability” spreadsheet for Southwest Airlines

(LUV) and Continental Airlines (CAL). Find the ROA (Net ROA), ROE (Net ROE), PE ratio (P/E—high and P/E—low), and the market-to-book ratio (Price/Book—high and Price/

Book—low) for each company. Because stock prices change daily, PE and market-to-book ratios are often reported as the highest and lowest values over the year, as is done in this instance.

Look at these ratios for both companies over the past fi ve years. Do you notice any trends in these ratios? Which company appears to be operating at a more effi cient level based on these four ratios? If you were going to invest in an airline, which one (if either) of these companies would you choose based on this information? Why?

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