Use the information provided below for Southwest Airlines to answer the requirements. $ millions 2013 2014 2015 Net operating assets (NOA) $ 7,448 $ 6,923 $ 7,929 Net nonoperating obligations (NNO) (332) (296) 127 Total stockholders' equity 7,780 7,219 7,802 Net nonoperating expenses (NNE) 130 129 117 Net operating profit after tax (NOPAT) 884 1,265 2,298 Net income 754 1,136 2,181 Revenue 19,254 20,160 21,375 Below are the adjustments that analysts would use to account for Southwest's operating leases as if they were capitalized. Adjustments are based on the present value of Southwest's operating leases for fiscal years 2013-2015. Balance Sheet Adjustments ($ millions) 2013 2014 2015 Net operating assets (NOA) +3,267 +4,244 +3,188 Net nonoperating obligations (NNO) +3,267 +4,244 +3,188 Equity 0 0 0 Income Statement Adjustments ($ millions) 2013 2014 2015 Interest expense +129 +167 +126 Net nonoperating expense, NNE +81 +105 +79 Net operating profit after tax, NOPAT +81 +105 +79 Net income 0 0 0 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. Round ROE, RNOA, and NOPM to one decimal place (ex: 0.2345 = 23.5%). Round NOAT and FLEV to two decimal places. Use negative signs with answers, when appropriate. 2013 2014 2015 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. Round ROE, RNOA, and NOPM to one decimal place (ex: 0.2345 = 23.5%). Round NOAT and FLEV to two decimal places. Use negative signs with answers, when appropriate. ROE RNOA NOPM NOAT FLEV 2013 2014 2015 Unadjusted Adjusted Unadjusted Adjusted Unadjusted Adjusted 9.7% 9.84% X 28.36% X 9.84% X 0% X 9.84% X 11.9% 4.59% X 4.59% X 4.59% X 4.59% X 4.59% X 4.6% 0% X 0% x 0% X 0% x 0% X 2.6 x 2.58 X 2.58 x 2.58 X 2.58 X 2.58 X 4.27 x 0X 0 x OX OX b. Does the lease capitalization make a large difference in any of these ratios? Lease capitalization makes a large difference in both the RNOA and FLEV ratios. OLease capitalization makes a large difference in both the ROE and RNOA ratios. OLease capitalization makes a large difference in both the RNOA and NOPM ratios. OLease capitalization makes a large difference in both the ROE and FLEV ratios. Check Partially correct Marks for this submission: 4.00/31.00. Use the information provided below for Southwest Airlines to answer the requirements. $ millions 2013 2014 2015 Net operating assets (NOA) $ 7,448 $ 6,923 $ 7,929 Net nonoperating obligations (NNO) (332) (296) 127 Total stockholders' equity 7,780 7,219 7,802 Net nonoperating expenses (NNE) 130 129 117 Net operating profit after tax (NOPAT) 884 1,265 2,298 Net income 754 1,136 2,181 Revenue 19,254 20,160 21,375 Below are the adjustments that analysts would use to account for Southwest's operating leases as if they were capitalized. Adjustments are based on the present value of Southwest's operating leases for fiscal years 2013-2015. Balance Sheet Adjustments ($ millions) 2013 2014 2015 Net operating assets (NOA) +3,267 +4,244 +3,188 Net nonoperating obligations (NNO) +3,267 +4,244 +3,188 Equity 0 0 0 Income Statement Adjustments ($ millions) 2013 2014 2015 Interest expense +129 +167 +126 Net nonoperating expense, NNE +81 +105 +79 Net operating profit after tax, NOPAT +81 +105 +79 Net income 0 0 0 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. Round ROE, RNOA, and NOPM to one decimal place (ex: 0.2345 = 23.5%). Round NOAT and FLEV to two decimal places. Use negative signs with answers, when appropriate. 2013 2014 2015 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. Round ROE, RNOA, and NOPM to one decimal place (ex: 0.2345 = 23.5%). Round NOAT and FLEV to two decimal places. Use negative signs with answers, when appropriate. ROE RNOA NOPM NOAT FLEV 2013 2014 2015 Unadjusted Adjusted Unadjusted Adjusted Unadjusted Adjusted 9.7% 9.84% X 28.36% X 9.84% X 0% X 9.84% X 11.9% 4.59% X 4.59% X 4.59% X 4.59% X 4.59% X 4.6% 0% X 0% x 0% X 0% x 0% X 2.6 x 2.58 X 2.58 x 2.58 X 2.58 X 2.58 X 4.27 x 0X 0 x OX OX b. Does the lease capitalization make a large difference in any of these ratios? Lease capitalization makes a large difference in both the RNOA and FLEV ratios. OLease capitalization makes a large difference in both the ROE and RNOA ratios. OLease capitalization makes a large difference in both the RNOA and NOPM ratios. OLease capitalization makes a large difference in both the ROE and FLEV ratios. Check Partially correct Marks for this submission: 4.00/31.00
