Internal Analysis And Internal Analysis Of Southwest Airlines

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By utilizing their strategic capabilities obtained through the competences and resources, Southwest Airlines increases the competitive advantage over other airlines. To gain competitive advantage companies use competences and the tangible and intangible assets of the entity are considered resources (Thompson and Gamble, 2012). A company can react to the external environment and be successful through their capabilities and resources. This internal analysis will look at Southwest Airlines competencies and resources over the last three years through their financials. When looking a company’s financial statements and ratios, the numbers explain different financial standpoints within the company. Some companies would like to see certain areas in their finances increase and decrease. Looking at Southwest Airlines’ ratio we will consider the current ratio, debt to equity ratio, fixed assets turnover and gross profit margin. In looking at these ratios one can view areas the company is doing well in as well as areas of improvement.
Southwest Airlines current year, 2016, ratio compared to 2015 and 2014 was up and down. In the current ratio one wants to see an upward trend (Luv Income Statement, 2017). In Appendix A from 2014 to 2015 downward trend is observed, then in 2016 the trend is upward but not higher than 2014. Also in debt to equity a company wants to see a downward trend. In 2015 the trend went down from 2014, but from 2015 to 2016 the trend went up. Southwest Airlines did meet the trend and can be viewed as doing well in the gross profit margin. The gross profit margin indicates the total margin available to cover operating expenses and yield profit (Rothaermel, 2012). However, in fixed assets turnover an upward trend is what is generally wanted and Southwest Airlines has a downward trend.
In looking at the financial statements for Delta Air Lines ( DAL) and American Air Lines ( AAL) in comparison to Southwest the trends in current ratio is an upward trend. Current ratios often show whether a company is meeting short-term obligations. Based on the financial statements mentioned above it shows that Delta Airlines had a upward trend ( DAL Income Statement, 2017); whereas American Airlines trend was up
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