Problem 10-6A Suppose you have been presented with selected information taken fr

Question

Problem 10-6A Suppose you have been presented with selected information taken from the financial statements of Southwest Airlines Co., shown below SOUTHWEST AIRLINES CO Balance Sheet (partial) December 31 (in millions) 2017 $2,750 10,000 $12,750 2016 $4,000 12,200 th available attempts Noncurrent assets Total assets $16,200 $4,500 4,900 9,400 6,800 $12,750$16,200 $2,750 6,450 9,200 3,550 Current liabilities Long-term liabilities Total liabilities Shareholders' equity Total liabilities and shareholders' equity Other information

Explanation / Answer

2017 2016 Ans 1 Current ratio 2750/2750 4000/4500 1:1 0.89:1 *Current ratio = Current assets / current liabilities Ans 2 Calculation of free cash flow 2017 2016 Cash provided by operations $ (1,400.00) $   2,700.00 Capital expenditure $    (900.00) $ (1,250.00) Cash dividends $      (10.00) $       (11.00) Total free cash flow $    (293.00) $   3,455.00 2017 2016 Ans. 3 Debt to assets ratio 6450/12750 4900/16200 51% 30% *Debt to assets ratio = Long term debt / Total assets 2017 2016 Ans 4 Times interest earned 150/125 550/115 1.20 times 4.78 times *Times interest earned = Net income / Interest expenses

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