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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

#### 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.

\$2.49