QUESTION 8 Not complete Marked out of 1.00 PRag question Computing and Interpret

Question

QUESTION 8 Not complete Marked out of 1.00 PRag question Computing and Interpreting Key Ratios Assume the data presented below are from the financial statements of jetBlue and Southwest Airlines. Jet Blue South (S millions) Airways Airlines Total Liabilities, 2013 $5,139 $9,726 Total Liabilities, 2012 5,003 8,815 Total Assets, 2013 6593 15,463 Total Assets, 2012 6,549 14.269 Revenue, 2013 Net Income, 2013 3,779 12,104 227 599 Required a.Compute the return on equity ratio for jetBlue and Southwest for 2013. (Round your answer to one decimal place.) JetBlue Airways 96 Southwest Airlines 96 Which company earned the higher return for its shareholders? b. Compute the debt-to-equity ratio for each company as of December 31. 2013. (Round your answer to one decimal place.) JetBlue Airways Southwest Airlines Which company relies more on creditor financing?

Explanation / Answer

Jet Blue Airways: Equity, 2013 1454 =6593-5139 Equity, 2012 1546 =6549-5003 Average equity 1505.5 =(1465+1546)/2 Southwest Airlines: Equity, 2013 5737 =15463-9726 Equity, 2012 5454 =14269-8815 Average equity 5595.5 =(5737+5454)/2 a Return on equity ratio: Jet Blue Airways 15.1% =227/1505.5 Southwest Airlines 10.7% =599/5595.5 Jet Blue Airways earned higher return for its shareholders b Debt Equity ratio: Jet Blue Airways 3.5 =5139/1454 Southwest Airlines 1.7 =9726/5737 Jet Blue Airways relies more on creditor financing c Net income % of revenue Jet Blue Airways 6.0% =227/3779 Southwest Airlines 4.9% =599/12104

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