Southwest gross margin is 71.63 % and an operating margin of 20.71%. The Pre-Tax return on equity is at 32.7 %.As found in the NASDAQ income statement below, the corporation’s gross profit has increased over the last 4 years. The total revenue has done the same equal to an amount of $19,820,000 in December of the year 2015. By looking at this income statement we can see the
SOUTHWEST AIRLINES: IF IT MATTERS TO YOU, IT MATTERS TO US9success of the corporation. Here is the income statement for Southwest Airlines by NASDAQ (2016):Ratios and WACCDuring the past 12 months, the average Free Cash Flow per Share Growth Rate of Southwest Airlines Co was 17.80% per year. During the past 3 years, the average Free Cash Flow per Share Growth Rate was 49.20% per year. During the past 5 years, the average Free Cash Flow per Share Growth Rate was 19.70% per year. Market value added as defined at Stock
SOUTHWEST AIRLINES: IF IT MATTERS TO YOU, IT MATTERS TO US10Analysis- MVA (2016) is “a measure of the value a company has created in excess of the resources already committed to the enterprise.” The weighted average cost of capital, also knownas the rate that the company pays on overage to its security holders to finance its assets. The assets of the company are finances by debt and equity. With WACC the average costs of these sources of financing that is weighted by its respective use in a given situation. Southwest’s weighted average cost of capital is 11.26 % as explained by (Gurufocus.com, 2016). The return on invested capital for Southwest is 38.25 % (Gurufocus.com, 2016). As of today, Southwest Airlines weighted average cost of capital is 11.26%. Southwest Airlines return on invested capital is 38.25% as calculated using TTM income statement data (Gurufocus.com, 2016). Southwest Airlines generates higher returns on investment than it costs the company to raise the capital needed for that investment. It is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see. The weighted average cost of capital increased from 10.44% to 10.65% through using equity. This increase not good, however, it was chosen through looking at the debt-equity ratios of debt and equity financing. The capital structure changed by only 2% in either direction using Equity so Southwest is familiar with it. Using debt the capital stricture changes by over 10% (Gurufocus.com, 2016).Functional Level StrategiesLast year, Southwest Airlines flew eighty six million passengers, which is more than any other airlines within the United States. They operate three thousand two hundred flights a day, own a fleet of five hundred forty four planes and serves sixty nine domestic cities from Seattle toFort Lauderdale, Florida and from Lubbock, Texas, to Buffalo. Southwest has a decentralized structure. They encourage and promote employee empowerment. There is only eight or nine
SOUTHWEST AIRLINES: IF IT MATTERS TO YOU, IT MATTERS TO US11employees per each supervisor. Southwest observes a teamwork approach instead of an individual.