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Financial Ratios of Southwest Airlines and Singapore Airlines

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Added on  2020-12-29

Financial Ratios of Southwest Airlines and Singapore Airlines

   Added on 2020-12-29

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Financial Analysis
Financial Ratios of Southwest Airlines and Singapore Airlines_1
EXECUTIVE SUMMARYThe below report is based on the financial analysis of two different companies that areSouthwest Airlines and Singapore Airlines. Various financial ratios have been calculated for thepurpose of analysis as it can help to determine that organisation is performing well or not.Strengths and weaknesses of both the companies have also been analysed with the help of ratiosthat are calculated for the purpose of assessing actual position of the company in market.
Financial Ratios of Southwest Airlines and Singapore Airlines_2
Table of ContentsEXECUTIVE SUMMARY.............................................................................................................2INTRODUCTION...........................................................................................................................1ANALYSIS OF COMPANIES.......................................................................................................1Non financial analysis............................................................................................................1Financial analysis...................................................................................................................3COMPARISON OF BOTH THE AIRLINES...............................................................................12CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................15APPENDIX....................................................................................................................................16
Financial Ratios of Southwest Airlines and Singapore Airlines_3
INTRODUCTIONFinancial analysis can be defined as the process of analysing financial statements of anorganisation in which actual performance, available resources, profits, incomes, expenditures andrevenues are evaluated. Main purpose of financial analysis is to assess that business is in profitsor losses and it is performing well or not (Financial analysis, 2018). In all the companiesfinancial analysts are hired by directors so that they can properly check final accounts thatincludes income statement, balance sheet and cash flow statement. It guides managers toformulate effective strategies for the business in order to attain predetermined objectives. Mainaim of this report is to understand the importance and uses of financial analysis to analyse actualperformance of a company. In this project report financial analysis has been conducted for twodifferent organisations that are Southwest and Singapore Airlines. For the purpose of analysisdifferent ratios like profitability, liquidity, efficiency and gearing ratios have been calculated forboth the organisation. At last comparison performance of both the companies, strengths andweaknesses are discussed under this assignment.ANALYSIS OF COMPANIESNon financial analysisOverview of Southwest Airlines:It was established in year 1967 by Mr. Herbert Kelleher and Rollin King. Currently theorganisation is operating business in US successfully. Its headquarter is in Dallas, Texas. Thebusiness in executed with the help of more than 57000 employees. Main goal of the organisationis to satisfy all its customers by providing them good services on low prices so that all of themcan be retained for a long period. A unique boarding process is used by the company that helpsto entertain customers while they have to wait for sometime while boarding (Vogel, 2014). InSouthwest Airline the interior is also very attractive as in year 2001 it as introduced spirit interiorin flights. Various characteristics of flights attracts large number of customers. The features thatare included in the airline are free Wi-Fi, paid live television streaming on demand of visitorsetc. An evolve interior has also been introduced in some sections of flight in which retro themeand eco friendly seats are launched by the organisation.The most attractive thing which is offered to the customers is rapid reward. In this rewardsystem some points are gifted by the organisation to the visitors all of them are provided1
Financial Ratios of Southwest Airlines and Singapore Airlines_4
according to cost of tickets. These points can be redeemed by customers to get a free ticket or aparticular percentage of discount on their flights. Different types of promotional activities areused by the company while conducting marketing operations. It is mainly known for humour inall its advertisements (Laudon and Traver, 2013). Current slogan of Southwest Airline is “Lowfares nothing to conceal”. Mission, vision and objective of the company are as follows:Mission: Southwest Airline's mission is to deliver best quality services to the customersso that they get satisfied and organisation may attain higher growth.Vision: Southwest Airline's vision is to become first choice of customers and to bee mostloved, flown and profitable airline.Objective: Main objective of the company is to capture large market area so thatbusiness can be expanded in more geographic locations in order to increase profits and sales(Annual report of Southwest Airlines, 2018).Overview of Singapore Airlines:It is one of the oldest airlines in world as it was founded in year 1947 and the operation ofthe organisation are commenced from year 1972. Peter Seah Lim Huat is the chairman of theorganisation and Goh Choon phong is the chief executive officer of Singapore Airlines.Currently the organisation is having more than 14700 employees. It is owned by government ofSingapore. Its headquarter is in Changi. For branding the business entity is using Singapore Girl.The business is operated by the airline in 32 countries with 62 different destinations. Theorganisation is having strong presence in Southeast Asian region (Sheikhi, Ranjbar and Oraee,2012). When financial crisis had taken place in year 1997 the organisation have discounted itsflights in some destinations. The airline is offering five different classes of services to its visitorsthat are economy, premium, business, first class and suites. The quality of food which isdelivered to the customers is very good and different range of food is offered to the visitors. AsSingapore Airline's business in executed by government hence the prices for the tickets is low ascompare to other flights but it is very costly for the customers who belongs to other countriesexcept Singapore. This airline is the part of world's 15 most preferable airlines. Vision, missionand objectives of the company are as follows:Vision: The organisation is willing to maximise its profits by delivering good airtransportation services to the customers.2
Financial Ratios of Southwest Airlines and Singapore Airlines_5
Mission: Singapore Airline's mission is to be on the top of the airline industry in upcoming period.Objectives: Main objective of the organisation is to improve its performance so that itcan increase its profits and number of customers (Annual reports of Singapore Airlines, 2018).Financial analysisRatio analysis:It can be defined as the process of analysing different types of ratios thatare calculated with the help of various information which is collected from financial statementsof the organisation (Cucchiella, D’Adamo and Gastaldi, 2015). Calculation of some selectedratios for Singapore Airline and Southwest Airlines is as follows:Profitability ratios: Such type of ratios are calculated to analyse overall profitability ofan organisation. It depicts that company is earning profits or facing losses. It guides stakeholdersto determine business's ability to generate profits against the expenses. It is very important for allthe investors and other stakeholders as they use it to make strategic decision. Following ratios arecalculated to evaluate profitability of both the business entities:Net profit ratio: This ratio is calculated to analyse overall net profitability of thecompany after deducting all the costs that includes production, administration etc. Itshows the relationship between net profit and organisation's sales. Calculation of thisratio is as follows:Formula: Net profit after tax / total revenues * 100Southwest Airlines:Particular201520162017Net profit218122443488Total revenues198202042521171Net profit ratio11.0010.9916.48Singapore Airlines:Particular201520162017Net profit407852442Total revenues155661522914869Net profit ratio2.615.592.973
Financial Ratios of Southwest Airlines and Singapore Airlines_6

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