Southwest and United Essay Example | Topics and Well Written Essays - 3000 words

southwestern and United - Essay ExampleThis report provides an insightful study and a comparative analysis of the dickens companies southwestward airlines and United airlines. As both the companies belong to the same industry, this report has been devised with a consideration to canvass their pecuniary performance with the help of the annual reports for the division 2005. The fact that the United airlines filed for bankruptcy in the year 2002 is greatly evident in the current pecuniary position of the order. This report evaluates the factors as to the differences in the monetary performance of the two companies.The financial analysis in this report provides the detailed comparison of both the companies financial position and performance based on the data obtained from the companies financial statements with respect to realizeability, liquidity, solvency and investment. It first of all presents a ratio analysis and then identifies major factors that have precipitated the dif ferent results for the two countries.Ratio analysis is the pre-eminent technique to evaluate a companys performance and figure out major problems (Meigs & Meigs). Riahi-Belkaoui propounds that financial ratios serve the analysts in do the information in financial statements interpretable for the various purposers of financial statements. In the same vein, this paper will assess and analyse the financial position and performance of the two companies Southwest airlines and United airlines with the help of a broad array of financial ratios using financial data available from the two companies annual reports. positivity Analysis meshworkability analysis is the first step in evaluating any companys financial position. Most of the financial statement users happen to be interested in knowing the potency of a company in terms of enhancing its ability to earn profit for the stakeholders. Riahi-Belkaoui says, the profitability ratios portray ability of the firm to efficiently use the capi tal committed by stockholders and lenders to generate revenues in excess of expenses (11). The analysis to assess the profitability of Southwest and United airlines has been done with the help of following ratios.RatiosSouthwestUnitedOperating Profit Margin10.81%(1.26%) fire Profit Margin11.52%(121.87%)Return on Capital Employed12.28%(1.13%)Return on Assets3.85%(109.48%)Mcmenamin says that the Operating Profit Margin Percentage evaluates the percentage of profit earned by a company on gross revenue after the production and distribution activities. It reveals how well the company manages its expenses so as to attain maximum profit out of its total sales for its shareholders. Southwests direct profit ratio of 10.81% reflects that the company loses about 90% of its operating revenues in meeting its various operating expenses. United airlines on the other hand, fails to manage its operating expenses that leads the company towards operating loss of 1.26%. Despite the fact that the compa nys operating revenue for the year 2005 is much greater than that of the Southwest, it fails to deem it as profit for its shareholders. The Net Profit margin shows what percentage of profit a company earns on its sales. It reveals the profit retained by a company after accounting