Fin 571 – Interpreting Financial ResultsInterpreting Financial ResultsBrian Dalman FIN/571April 18, 2016Paul StevensInterpreting Financial ResultsThe financial health of a company is detailed within three documents that provide the necessary information required to evaluate the financial condition:  the balance sheet, the income statement, and the cash flow statement.  Analyzing financial statements includes the use of financial ratios.  McHugh, McHugh, and Nickels (2010) state “Ratio analysis is the assessment of a firm’s financial condition, using calculation and financial ratios developed from the firm’s financial statements” (p. 473).  Southwest Airlines (SWA) is a publicly traded company with financial reports that track annual performance.  This information is compared against the airline industry benchmark.A company’s short term ability to convert assets into cash to cover debt is referred to as liquidity.  Two ratios are used when evaluating liquidity, the current ratio, and the quick ratio. The current ratio looks at current assets divided by current liabilities.  As a general guideline, a current ratio of 2.0 or higher indicates the company has at least twice as many assets as it does liabilities.  The quick ratio uses cash, cash equivalents, and accounts receivable divided by liabilities.  The quick ratio of 1.0 or higher is considered as acceptable financial performance.  As shown in Table A, SWA’s current ratio is below the guideline of 2.0 or higher.  The values indicate that the ability to meet short-term financial obligations has decreased in three consecutive years for SWA and is worse than the industry average.
Airline IndustrySWASWASWA Year2015201520142013Current Ratio0.770.540.660.79Quick Ratio0.410.50.610.7Table A  (“Investor Relations”, 2015).(“Airline Industry”, 2016). The leverage ratio is intended to evaluate a company’s debt level and is the proportion of companys total liabilities to stockholders equity.  The number indicates how much a company owes of total liabilities for one dollar of stockholders equity and is often a measure of risk.  The lower the number, the stronger the balance sheet of the company.  As shown in Table B, SWA’s leverage ratio is 1.01 for 2015.  The values indicate a strong balance sheet in spite of a slight increase in the last three years for SWA.  Values are substantially better than the industry average.
1.02.3 Stock Status – All Notes to the Company
1.02.3.1 Notes to the Company 2 SHARES (BASE: 3 )
Shares
“For the next 7 quarters and the following 12 months, shares of The Company are expected to be listed in the “Traded Stock” category on Wall Street. In the following three quarters, as noted above, shares of The Company are forecast to be “Traded”. In the 12 months ended 27 September 2016, the Company experienced a 1.02.3 gain/loss. In the 15 months ended June 30, 2016, shares of The Company were a record $1.00, or 1.02% of The Company’s total assets in a multi-year period.
In the third quarter of 2016, shares of The Company were a record $1.05, or 3.04% of The Company’s total assets in a multi-year period. In the first three months of 2016, shares of The Company were a record $3.75, or 7.13% of The Company’s total assets. In the fourth quarter of 2016, shares of The Company were a record $9.33, or 1.04% of The Company’s total assets in a Multi-year period. * Compared with the 2015 quarter, The Company did not meet its 2014 forecast of annual growth. As a result, shares of The Company began to fall short (i.e., ended less than 20 percent) during the third quarter; as a result, shares decreased in value in the fourth quarter of 2016 and ultimately discontinued sales.
In 2015, the Company experienced a decline in its net sales. In the second quarter of 2015, the Company experienced a decline in net sales; as a result, shares of The Company experienced a decrease in value in the third quarter of 2016 and eventually discontinued sales.
In 2016, the Company experienced loss on earnings, net of other income (expense), net of other cash received.
In 2017, the Company experienced negative net operating profits. In the third quarter of 2017, the Company experienced a negative net operating profit and net cash on hand (cash) from holding operations and the impact of the change in deferred income tax assets into other financial and tax activities from March 2017 to April 2018.
In 2019, the Company experienced a slight decline in earnings and net cash on hand (cash) from holding operations and the impact of the change in deferred income tax assets into other financial and tax activities from March 2017 toApril 2018.
In 2021, the Company experienced a significant decline in financial and tax positions in the fourth quarter of 2020. The Company experienced losses on earnings, net of other income (expense) and other cash provided.