Airlines Financial Performance Analysis

As an investor, there are several primary factors you need to know when you are investing in a company. For any investment there are certain amount of risk and opportunity, and investing in airline industry is a challenging endeavor. The rate of return on capital in the air airline industry is among the lowest compared to other business in the same industry. Obtain the most recent annual report (10-K and 10-Q’s), and any other data you find useful, to do a financial performance analysis of one of the major U.S. airlines. For example, United Airlines. The purpose of this assignment is to provide students with the opportunity to analyze the financial performance of selected airlines.

Prepare no more than four-page report presenting the results of your evaluation of your selected airline (DELTA AIRLINES). List six exhibits that you must include (excluding the graphs and tables). Leave uniform margins of at least 1 in. (2.54 cm) at the top, bottom, left, and right of every page. The first line of each paragraph should be automatically indented. All papers should have automatically inserted page numbers that show in the upper right corner on all pages except the first. Do not insert these page numbers by hand. Instead, use Word’s Header/Footer tool. Finally, use a 12-point Times New Roman font for your project.

Your report should explain and interpret the important information in these exhibits. (Don't talk about a number, ratio or percentage unless it is important for the reader's understanding of this company. When you do talk about a number or ratio, explain what it reveals about United Airlines and don't just say it has gone up or down.) While you will certainly analyze all the financial statements extensively, your analysis would be incomplete if it only considered the financial information on the company. Include non-financial information you think is important in analyzing of your selected, but keep the focus of your paper on analysis of the financial information.
Questions:

1. For each of the most recent 3 years, report the following information:
   a. Net income or loss
   b. Current ratio, current asset, long term liabilities and equity
   c. Earnings per share (EPS)
   d. Price earning (PE) ratio at year end (use the fiscal year end prices and the earnings for the years to calculate the PE ratios- and show me the numbers you use to calculate the PE ratio). This is Exhibit 1.
   e. In addition, include the net income reported for the first two quarters of 2019. This is Exhibit 2.
   f. List each of the ratios on pages 295-297 of your textbook and calculate these ratios the airline for the 12/31/2017 and 12/31/2018 financial statements. Include these as Exhibit Two. (I need to see the numbers you used to calculate all ratios. For example, if you are calculating the current ratio, you need to show me the current assets and the current liabilities and the result. Note your team must decide what ratios are most important and what competitor should be used for the comparison. This is Exhibit 3. 4. Your textbook talks about common size financial statements beginning on page 227.
2. Prepare common size income statements and balance sheets for your selected airline (12/31/2017 and 12/31/2018). Include these as Exhibit 4 and 5.
3. Calculate the market value of your airline' common stock at 12/31/2017 and 12/31/2018. Total market value of common stock is the number of shares outstanding.
4. Were the present current assets adequate to support current liabilities?
5. Based on the financial data from the income statements and the balance sheets, prepare a list of strengths and weaknesses of your airline.
6. Would you recommend whether a potential investor should include the airline in his investment portfolio? In preparing your analysis, the following material must be included.

Sample Solution