Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider the following financial data for American Airlines Group Inc. and Delta Air Lines, Inc. for the fiscal year 2023: ($ millions) American Airlines Group

Consider the following financial data for American Airlines Group Inc. and Delta Air Lines, Inc. for the fiscal year 2023:

($ millions)

American Airlines Group Inc.

Delta Air Lines, Inc.

Net sales

$45,768

$49,634

Cost of sales

32,499

34,674

Gross profit

13,269

14,960

Operating expenses:



Selling, general, and administrative

6,734

7,312

Research and development

1,453

1,672

Operating income

5,082

5,976

Interest and other (income) expense

1,712

1,764

Interest and investment income

(538)

(584)

Earnings before provision for income taxes

3,908

4,796

Provision for income taxes

782

960

Net earnings

$3,126

$3,836

Required: a. Calculate the return on equity (ROE), return on assets (ROA), and return on financial leverage (ROFL) for American Airlines Group Inc. and Delta Air Lines, Inc. Assume a tax rate of 25%. b. Disaggregate the ROA into profit margin (PM) and asset turnover (AT) for both companies. Discuss the key factors affecting their ROA. c. Analyze the trend in operating income over the past five years. How does it impact their financial health and ability to invest in fleet expansion? d. Evaluate the debt-to-equity ratio for American Airlines Group Inc. and Delta Air Lines, Inc. What does it imply about their financial risk and leverage? e. Compare the operating profit margins of American Airlines Group Inc. and Delta Air Lines, Inc. What insights can be drawn about their cost control and profitability?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Volume 1

Authors: Charles T. Horngren, Walter T. Harrison, Jo Ann L. Johnston, Carol A. Meissner, Peter R. Norwood

9th Canadian edition

978-013309863, 9780133128338, 013309863X, 133128334, 978-0132690096

More Books

Students also viewed these Accounting questions

Question

Evaluate the limit. lim x X-21

Answered: 1 week ago