Southwest Financial Analysis

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[pic] Southwest Airlines Financial Performance Analysis Presented to Gary C. Kelly Chairman of the Board, President and CEO by Total Resource Network Raquel Alston, Tanya Spencer and, Nicole Stenhouse for BUS 515 Financial Management Professor James Kerwin October 3, 2011 Introduction Total Resource Network (TRN) congratulates Southwest Airlines for thirty-eight years of consecutive profitability. This is a major accomplishment that should be applauded especially during this economic recession and recovery period. Southwest’s success has been attributed to their core values and mission that begin with their employees and exceptional customer service. These two attributes along with low airfares have…show more content…
“The short-term liquidity ratios are used in the evaluation of short-term liquidity to convert current assets into cash in order to reduce the financial obligations of the company as they become due” (Covee 2010 pg.45). These ratios are particularly significant to the creditors and potential lenders of a company because they determine the ability of that company to meet current payments of a debt. [pic] Southwest’s current ratio is 1.29% with JetBlue following closely behind with a 1.25% current ratio, as compared to industry average of .80% one can see Southwest’s ability to repay debt exceeds the industry average. The quick ratios have a difference of .17% between Southwest’s 1.13% and JetBlue’s .96%, compared to the industry average of .63% the difference is almost 50%. This equates to Southwest’s ability to pay short term obligations without relying on the sale of its inventories, which also means they are in good liquid condition. Efficiency Collection period is a key measure of accounts receivable quality. Increases in the average collection period of receivables may indicate increases in acceptance of poor credit risks or less energetic collection efforts. Inventory turnover measures how quickly inventory is sold. Decrease in inventory turnover may indicate problems such as slower-moving merchandise or a worsening coordination of buying and selling functions. Interestingly, Southwest’s average collection period is the best in the
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