Question 1)

Data from the financial statements of JetBlue Airways and Southwest Airlines are presented below.

Requirements (show your formulas and calculations):

a.) Compute the return on equity ratio for JetBlue and Southwest for 2017. Which Company earned the higher return for its shareholders?

b.) Compute the debt-to-equity ratio for each company as of December 31, 2017. Which company relies more on creditor financing?

c.) For each company, compute net income as a percentage of revenue in 2017.

d.) For each company, calculate working capital and current ratio for 2017 and 2016. How did they change from 2016 to 2017 (improve or worsen)? What may have caused those changes?

e.) For each company, compute the return on assets ratio (ignore any interest and tax impact just use net income/total average assets) for 2017. Which Company earned the higher return based on its assets?

f.) Based on your answers to questions a - e, compare these two competitors, specifically if you had $10,000, which would you invest in. What might be the cause of any differences in the ratios that you computed?

g.) Name three specific ways/strategies that the companies could improve their current ratio.

($ Millions) Total liabilities, 2017 Total current liabilities, 2017 Total liabilities, 2016 Total current liabilities, 2016 Total assets, 2017 Total current assets, 2017 Total assets, 2016 Total current assets, 2016 Revenue, 2017 Net income, 2017 JetBlue Airways Southwest Airlines $ 4,947 $ 13,973 $ 2,395 $ 6,905 $ 5,310 $ 14,845 $ 2,214 $ 6,844 $ 9,781 $ 25,110 $ 1,206 $ 4,815 $ 9,323 $ 23,386 $ 1,403 $ 4,498 $ 7,015 $ 21,171 $ 1,147 $ 3,488