Invest in SouthwestInvest in Southwest

Angela PettitAngela PettitBeatrice EjamBeatrice EjamRenee HannaRenee HannaJames RobersonJames RobersonIvelisse ColonIvelisse Colon

Angela PettitAngela PettitBeatrice EjamBeatrice EjamRenee HannaRenee HannaJames RobersonJames RobersonIvelisse ColonIvelisse Colon

ACC/280ACC/280May 12, 2008May 12, 2008Samuel SmithSamuel SmithUniversity of PhoenixUniversity of Phoenix

ACC/280ACC/280May 12, 2008May 12, 2008Samuel SmithSamuel SmithUniversity of PhoenixUniversity of Phoenix

IntroductionIntroductionIntroductionIntroduction

Southwest History & Southwest Today

Cash and Cash Equivalent Southwest Two Largest

Current Assets. Southwest Current Assets &

Liabilities Southwest Profit Margin Southwest Liabilities &

Assets Turnover Invest in a Company That

Always

Southwest History & Southwest Southwest History & Southwest TodayToday

Herb Kelleher & Rollin Herb Kelleher & Rollin KingKing

Started out with three Started out with three aircraftaircraft

Southwest History & Southwest Today(Cont.)

Largest airline worldwide Fleet and flights Consistent profit

Cash and Cash Equivalent

Three years comparison

2007 Cash and cash equivalent in millions = $2,213

2008 Cash and cash equivalent in millions = $1,368

2009 Cash and cash equivalent in millions = $1,114

Three years comparison

2007 Cash and cash equivalent in millions = $2,213

2008 Cash and cash equivalent in millions = $1,368

2009 Cash and cash equivalent in millions = $1,114

Cash and Cash Equivalent (Cont.)

CASH AND CASH

EQUIVALENT GRAPH

CASH AND CASH

EQUIVALENT GRAPH

HORIZONTAL ANALYSIS

Percentage difference from 2007 to 2008 38.2%

Percentage from 2007 to 2009 was 49.7%

HORIZONTAL ANALYSIS

Percentage difference from 2007 to 2008 38.2%

Percentage from 2007 to 2009 was 49.7%

Southwest Current Assets(Using Vertical Analysis)

SOUTHWEST AIRLINES, INC.(Partial) CONDENSED BALANCE SHEET

DECEMBER 31, 2009

 IN MILLIONS             

ASSETS  2008 Percent 2009 PercentCurrent assets:      

     Cash and cash equivalent $1,368 51.6% $1,114 33.2%  Short-term investments 435 16.4% 1,479 44.0%               

Southwest Current Assets & Liabilities

Current Ratio = Current Assets Current Liabilities

2009 2008 $3,358 Billion = 1.26:1 $2,653 Billion = 0.95:1$2,676 Billion $2,806 Billion

Working Capital = Current Assets – Current Liabilities 2009 2008$3,358 - $2,676 = $682mil $2,653 - $2,806 = ($153)mil

Southwest Profit Margin(Net Income)

2009 2008 2007

$99 million $178 million $645 million

Difference from 2008

$79 million

Difference from 2007

$467 million

Southwest Profit Margin (Cont.)(2009 & 2008)

NET INCOME =

PROFIT

NET SALES

MARGIN

2009 2008

$99 Million = 1.00% $178 Million = 1.6%

$9,861Billion

$11,023 Billion

Southwest Liabilities & Assets Turnover

SOUTHWEST AIRLINESCONDENSED BALANCE SHEET (PARTIAL)

31-DecIncrease or (Decrease)

during 2009 In millionsCurrent Liabilities 2009 2008 Amount Percent Accounts payable 746 668 78 11.7% Accrued liabilities 696 1012 (316) -31.2% Air traffic liability 1044 963 81 8.4% Current maturities of long-term debt 190 163 27 16.6% Total Current Liabilities 2676 2806 (130) -4.6%

Long-term Liabilities Long-term debt less current maturities 3325 3498 (173) -4.9% Deferred income taxes 2207 1904 303 15.9% Deferred gains from sale and leaseback of aircraft 102 105 (3) -2.9% Other noncurrent liabilities 493 802 (309) -38.5% Total Long-term liabilities 6127 6309 (182) -2.9%

Total Liabilities 8803 9115 (312) -3.4%

Southwest Liabilities & Assets Turnover (Cont.)

Southwest Airline 2009 2008

$10,350,000 $11,023,000

$14,068,000 + $14,269,000 = .73 times $16,772000 + $14,068,000 = .71 times

2 2

Industry Average

.71 times

Invest in a Company That Always

Focuses on improving profitability

Finds inventive ways to contain cost

Maximizes productivity Finds new ways to improve

the customer experience

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