Historical Financial Statements (Income Statement, Balance Sheet and Statement of
Cash Flows) from the 3 most current years southwest airlines. These should be downloaded
from the SEC website. The financial statements must include horizontal (shown
between the years) and vertical analysis (shown to the right of the last year of
historical data).
2. Ratio analysis for the ratios shown on Table 1 in the Guide to Case Analysis (CA) of
the textbook:
a. Profitability ratios
b. Liquidity ratios
c. Leverage ratios
d. Activity ratios
e. Price-to-earnings ratio
f. The changes between years are included in the calculations.
3. Competitor ratios to compare with the ratios that were calculated in item 2. These
should be included on the same tab as the ratio analysis for the firm.
4. Financial analysis should include comparisons to the firm’s main competitor as well
as to the industry. How does the financial position of the firm influence the strategic
direction of the company? This section should not be used to define what each ratio
is rather it should clearly provide analysis based on the calculations as to the strategic
choices and implications of the firm’s financial position. A compare and contrast
with the main competitor should be included in this section of narrative.
Sample Solution
The financial position of a firm plays an important role in influencing the strategic direction of the company. Financial analysis should include comparison to both the firm’s main competitor as well as to industry averages, so that management can identify areas where they have financial strengths and weaknesses relative to their competitors or within the sector overall. For example, if a firm has lower than average profits yet higher than average debt levels compared to its competitors, management may need to strategize additional ways of generating revenue while reducing costs in order to improve its financial position. On the other hand, if a firm has large
Sample Solution
The financial position of a firm plays an important role in influencing the strategic direction of the company. Financial analysis should include comparison to both the firm’s main competitor as well as to industry averages, so that management can identify areas where they have financial strengths and weaknesses relative to their competitors or within the sector overall. For example, if a firm has lower than average profits yet higher than average debt levels compared to its competitors, management may need to strategize additional ways of generating revenue while reducing costs in order to improve its financial position. On the other hand, if a firm has large