Southwest Airlines And The World Largest Low Cost Carrier

1193 WordsNov 12, 20155 Pages
Southwest Airlines is one of the United States major airlines and the world largest low-cost carrier. According to the U.S. Department of Transportation, Southwest Airlines is the United States’ largest carrier in terms of originating domestic passengers boarded. Financial Ratio Analysis The decreasing of current ratio from 0.785:1 to 0.744:1 from 2013 to 2014 suggests that Southwest Airlines’ short term debt paying ability also decreases. This is not a good sign because it implies that either decreasing in current assets or increasing in current liabilities, and it was both in Southwest’s case. Moreover, since the ratios are both less than one, it suggests that Southwest Airlines has more current liabilities than current assets. The…show more content…
Both asset turnover and return on assets denote positive use and increase of assets. The surge from 93.39% to 141% of return on common stockholders’ equity signifies the positive profit of investors. A similar jump also happens to the earnings per share ratio as the net income increases. Because of Southwest Airlines’ good performance during the year, its market price skyrocketed and caused an increase in the price-earnings ratio. Since the differences of EPS, P-E, and return on common stockholders’ equity are fairly high, the company is generating profit, and they will be attracting new investors. The rise in payout ratio resulted from higher dividends on common stock is appealing to investors. The solvency ratios indicate Southwest Airlines’ ability to survive over a long period of time and present Southwest Airlines in a more promising manner through the improvement of the company’s ability to interests as they are due can be seen through the growth of times interest earned from 10.2 times to 14.97 times between 2013 and 2014 respectively. However, the percentage of total assets provided by creditors also raises as the debt to asset ratio progresses from 62.07% to 66.46%, and it is not necessarily a good achievement since, after all, they are liabilities. Recent Company News Southwest Airlines has been in the spotlight for a few events in the past month or so. Recently, the company has announced ten domestic new non-stop routes for 2016.
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