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Financial analysis of Southwest Airlines

Review the financial statements of Southwest Airlines in its latest annual report. (http://www.southwest.com/investor_relations/annual_reports.html). Then answer questions as follow.

***Please provide with each answer which documents you used so I can review them to absorb the information ***

1) What important information does the Southwest income statement reveal about the financial performance of the company over the last three years? Please provide Excel formula calculations

2) What important information does the Southwest balance sheet reveal about the financial position of the company over the last two years?

3) Can you identify the major sources of financing used by Southwest Airlines from the information presented in the company's annual report? If not, how could you get this information?

4) Who is responsible for:

a) the issuance, and

b) the content

of the Southwest financial statements?

5) What assurance, if any, is there that the Southwest financial statements are in compliance with GAAP, and are free of material misstatements?

6) Of what use, if any, are the notes to the financial statements?

Solution Preview

Review the financial statements of Southwest Airlines in its latest annual report. (http://www.southwest.com/investor_relations/annual_reports.html). Then answer questions as follow.
***Please provide with each answer which documents you used so I can review them to absorb the information ***
1) What important information does the Southwest income statement reveal about the financial performance of the company over the last three years? Please provide Excel formula calculations
Income statement indicates the financial performance of the organization during a particular period. Information provided by the income statement comprises revenues, expenses and the profit figures. I have conducted horizontal analysis. As per associatecontent.com, the horizontal analysis compares specific items over a number of accounting periods. For example, accounts payable may be compared over a period of months within a fiscal year, or revenue may be compared over a period of several years. These comparisons are performed in one of two different ways.

Absolute Dollars

One method of performing a horizontal financial statement analysis compares the absolute dollar amounts of certain items over a period of time. For example, this method would compare the actual dollar amount of operating expenses over a period of several accounting periods. This method is valuable when trying to determine whether a company is conservative or excessive in spending on certain items. This method also aids in determining the effects of outside influences on the company, such as increasing gas prices or a reduction in the cost of materials.

Percentage

The other method of performing horizontal financial statement analysis compares the percentage difference in certain items over a period of time. The dollar amount of the change is converted to a percentage change. For example, a change in operating expenses from $1,000 in period one to $1,050 in ...

Solution Summary

Response explains the steps to analyse the financial statements of Southwest Airlines

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