Case Study: Historical Financial Analysis for Southwest Airlines.

1. Ratio analysis for the ratios shown on Table 1 in the Guide to Case Analysis (CA) of the textbook:
   1. Profitability ratios
   2. Liquidity ratios
   3. Leverage ratios
   4. Activity ratios
   5. Price-to-earnings ratio
   6. The changes between years are included in the calculations

I have the below tables started, based on SEC data:

TABLE 1 Key Financlal Ratios: How to Calculate Them and What They Mean Shows the percentage of revenues available to cover operating expenses and yjeld a profit. Higher is better and the trend should be upward. Shows the profitability of current operations without regard to interest charges and income taxes. Higher is better and the trend shoald be upward. Shows aftertax profits per dollar of sales. Higher is better and the trend should be upward. A measure of the return on total monetary irvestment in the enterprise. Interest is added to aftertax profits to form the namerator since total assets are financed by creditors as well as by stockholders. Higher is better and the trend should be upward. A measure of the return earned by stackholders on the firm's total assets. Higher is better, and the trend should be upward. Shows the return stackholders are earning on their capaital investment in the enterprise. A return in the 12-15\% range is "average," and the trend sbould be upward. A measure of the return shareholders are earning on the long-term monetary capital irvested in the enterprise. A higher return reflects greater bottom-line effectiveness in the use of long-term capital, and the trend should be upazard. Shows the carnings for each share of common stock outstanding. The trend should be upward, and the bigger the annual percentage gains, the better. Shows a firm's ability to pay current liabilities using assets that can be converted into cash in the near term. Ratio should definitely be higher than 1.0; ratios of 2 or higher are better still. Biger amounts are better because the company has more internal funds available to (1) pay its current lizbilities on a timely basis and (2) finance inventory expansion, additional accounts receivable, and a larger base of operations without resorting to borrowing or raising more equity capital. Measures the extent to which borrowed funds have been used to finance the firm's operations. Low fractions or ratios are betterhigh fractions indicate oreruse of debt and greater risk of bankruptcy. An important measure of creditworthiness and balance sheet strength. Indicates the percentage of capital investment that has been financed by creditors and bondholders. Fractions or ratios below .25 or 25% are usually quite satisfactory since monies invested by stockholders account for 75% or more of the company's total capital. The lower the ratio, the greater the capacity to borrow additional funds. Debt-tocapital ratios above 50% and certainly above 75% indicate a beavy and perhaps excessive reliance on debt, lower creditworthiness, and weak balance sheet strength. Should usually be less than 1.0. High ratios (especially above 1.0) signal excessive debt, lower creditworthiness, and weaker balance sheet strength. Measures the ability to pay annual interest charges. Lenders usually insist on a minimum ratio of 2.0, but ratios above 3.0 signal better creditworthiness. Measures inventory management efficiency. Tewer days of inventory are usually better. Measures the number of inventory turns per year. Higher is better. Indicates the average length of time the firm must wait after making a sale to receive cash payment. A shorter collection time is better. A measure of the return that shareholders receive in the form of dividends. A "typical" dividend yield ix 2-3\%. The dividend yield for fast-growth companies is often below 1.M (maybe even D); the dividend yield for slowgrowth companies can ran 4-5\%. P.E ratios above 20 indicate strong investor confidence in a firm's outlonk and earnings growth; firms whose future earnings are at risk or likely to grow slowly typically have ratios below 12 . Indicates the percentage of aftertax profits paid out as dividends. A quick and rough estimate of the cash the business is generating after payment of operating expenses, interest, and taxes. Such amounts can be used for dividend payments TABLE 1 Key Financlal Ratios: How to Calculate Them and What They Mean Shows the percentage of revenues available to cover operating expenses and yjeld a profit. Higher is better and the trend should be upward. Shows the profitability of current operations without regard to interest charges and income taxes. Higher is better and the trend shoald be upward. Shows aftertax profits per dollar of sales. Higher is better and the trend should be upward. A measure of the return on total monetary irvestment in the enterprise. Interest is added to aftertax profits to form the namerator since total assets are financed by creditors as well as by stockholders. Higher is better and the trend should be upward. A measure of the return earned by stackholders on the firm's total assets. Higher is better, and the trend should be upward. Shows the return stackholders are earning on their capaital investment in the enterprise. A return in the 12-15\% range is "average," and the trend sbould be upward. A measure of the return shareholders are earning on the long-term monetary capital irvested in the enterprise. A higher return reflects greater bottom-line effectiveness in the use of long-term capital, and the trend should be upazard. Shows the carnings for each share of common stock outstanding. The trend should be upward, and the bigger the annual percentage gains, the better. Shows a firm's ability to pay current liabilities using assets that can be converted into cash in the near term. Ratio should definitely be higher than 1.0; ratios of 2 or higher are better still. Biger amounts are better because the company has more internal funds available to (1) pay its current lizbilities on a timely basis and (2) finance inventory expansion, additional accounts receivable, and a larger base of operations without resorting to borrowing or raising more equity capital. Measures the extent to which borrowed funds have been used to finance the firm's operations. Low fractions or ratios are betterhigh fractions indicate oreruse of debt and greater risk of bankruptcy. An important measure of creditworthiness and balance sheet strength. Indicates the percentage of capital investment that has been financed by creditors and bondholders. Fractions or ratios below .25 or 25% are usually quite satisfactory since monies invested by stockholders account for 75% or more of the company's total capital. The lower the ratio, the greater the capacity to borrow additional funds. Debt-tocapital ratios above 50% and certainly above 75% indicate a beavy and perhaps excessive reliance on debt, lower creditworthiness, and weak balance sheet strength. Should usually be less than 1.0. High ratios (especially above 1.0) signal excessive debt, lower creditworthiness, and weaker balance sheet strength. Measures the ability to pay annual interest charges. Lenders usually insist on a minimum ratio of 2.0, but ratios above 3.0 signal better creditworthiness. Measures inventory management efficiency. Tewer days of inventory are usually better. Measures the number of inventory turns per year. Higher is better. Indicates the average length of time the firm must wait after making a sale to receive cash payment. A shorter collection time is better. A measure of the return that shareholders receive in the form of dividends. A "typical" dividend yield ix 2-3\%. The dividend yield for fast-growth companies is often below 1.M (maybe even D); the dividend yield for slowgrowth companies can ran 4-5\%. P.E ratios above 20 indicate strong investor confidence in a firm's outlonk and earnings growth; firms whose future earnings are at risk or likely to grow slowly typically have ratios below 12 . Indicates the percentage of aftertax profits paid out as dividends. A quick and rough estimate of the cash the business is generating after payment of operating expenses, interest, and taxes. Such amounts can be used for dividend payments