Financial Modeling Report: Analysis of Southwest Airlines Financials

This report presents a financial modeling analysis of Southwest Airlines, examining its financial performance and forecasting future outcomes. The analysis begins with the creation of pro-forma financial statements, considering historical data and economic factors. Key aspects include revenue forecasting, income statement analysis, and financial ratio calculations spanning from 2019 to 2021. The report also details the calculation of the discount rate using the Capital Asset Pricing Model (CAPM), incorporating the risk-free rate, market index return, and the company's beta. The report provides an in-depth look at the company's financial health and potential investment opportunities. The report uses resources like Reuters and Morningstar for financial data and analysis. The overall analysis gives an overview of the company's financial health.

Running head: FINANCIAL MODELLING
Financial Modelling
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1FINANCIAL MODELLING
Table of Contents
Pro-forma financial Statements.......................................................................................................2
References........................................................................................................................................3

2FINANCIAL MODELLING
Pro-forma financial Statements
The pro-forma financial statements for the Southwest Airline Company was prepared by
taking the historical financials of the company for the set of five years where the average growth
rate of the company was taken into account for the purpose of the analysis of the company. The
average growth rate for the company was also taken into account by considering the various
factors for the company including the external macro-economic factors and the business factors
for the company. The business factors for the company including the volatile profitability of the
company from the changing expenses base of the company has been the key factor that was
taken into account while analysing the financial statement of the company (Editorial 2019).
The pro-forma financial statement for the company by forecasting the revenue
base for the company and the income statement for the company. The financials ratio analysis for
the company was also done for the sum of three years from the year 2019-2021. The discount
rate for the firm was calculated with the help of the Capital Asset Pricing Model, which included
the risk free rate of return the return on the market index and the beta of the stock over the return
of the market index. The required rate of return for the equity shareholders of the firm will be
taken as the discount rate for the firm which was calculated to be around 1.78%
(Financials.morningstar.com 2018).

3FINANCIAL MODELLING
References
Editorial, R. (2019). ${Instrument_CompanyName} ${Instrument_Ric} Financials | Reuters.com.
[online] U.S. Available at: https://www.reuters.com/finance/stocks/financial-highlights/LUV
[Accessed 25 Apr. 2019].
Financials.morningstar.com. (2018). Balance Sheet for Southwest Airlines Co (LUV) from
Morningstar.com. [online] Available at:
http://financials.morningstar.com/balance-sheet/bs.html?t=LUV&region=usa&culture=en-US
[Accessed 25 Apr. 2019].