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    Financial statements and ratios

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    I am looking for American airlines

    current ratio.

    Return on sales

    Eeturn on sales

    Earming per share

    Debt Ratio

    price earnings ratio

    and state the company solvency, liquidity and profitability

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    Solution Preview

    The following info was obtained from the 2004 American Airlines annual report:

    Current Ratio = Current Assets / Current Liabilities
    CR = 4,971 / 7,018
    CR = 0.71

    An indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is. Current ratio is equal to current assets divided by current liabilities. If the current assets of a company are more than twice the current liabilities, then that company is generally considered to have good short-term financial strength. If current liablities exceed current assets, then the company may have problems meeting its short-term obligations.

    Return on Sales = Net Income Before Interest & Tax / Sales
    ROS = -144 / 18,645
    ROS = -0.0077
    This measure is helpful to management, providing insight into how much profit is being produced per dollar of sales.

    Earnings Per Share = Net Income - Dividends on Preferred Stock / Avg Outstanding Shares
    EPS = 18,645 / 3,900
    EPS = 4.74
    This is the single most popular variable in dictating a share's price. EPS indicates the profitability of a company. It is also a major component of the price-to-earnings valuation ratio

    For example, assume that a company has a net income of $25 million. If the company paid out $1 ...

    Solution Summary

    The financial statements and ratios for the return on sales are determined.