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Analysis of Southwest Airlines Find the most recent Southwest Airlines annual report, 10-K and 10-Qs on the

Internet. Use the annual report, 10-K, the two 10-Qs for 2011, 8-Ks, company announcements, WSJ articles and any other data you find useful to do an analysis of Southwest Airlines. Prepare no more than a three-page (double-spaced, 12 point font, normal margins) memo reporting the results of your analysis of this company. Below I list six exhibits that you must include. The memo should explain and interpret the important information in these exhibits. (Don't talk about a number, ratio or percentage unless it is important for the reader's understanding of this company. When you do talk about a number or ratio, explain what it reveals about Southwest Airlines and don't just say it has gone up or down.) While you will certainly analyze all the financial statements extensively, your analysis would be incomplete if it only considered the financial information on the company. Include non-financial information you think is important in analyzing Southwest Airlines, but keep the focus of your paper on analysis of the financial accounting information. The final paragraph of your memo should recommend whether or not a moderately risk averse potential investor in his mid-20s with a long run investing horizon should include Southwest Airlines in his investment portfolio. In preparing your analysis, the following material must be included. 1. For each of the most recent 5 years, report the following information: net income or loss, basic and diluted EPS, and PE ratio at year end (use the fiscal year end prices and the earnings for the years to calculate the PE ratios- and show me the numbers you use to calculate the PE ratio). In addition, include the net income reported for the first two quarters of 2011. This is Exhibit One. 2. List each of the ratios on pages 538 and 539 of your textbook and calculate these ratios for Southwest Airlines for the 12/31/2010 and 12/31/2009 financial statements. Include these as Exhibit Two. (I need to see the numbers you used to calculate all ratios. For example, if you are calculating the current ratio, you need to show me the current assets for Southwest Airlines/current liabilities for Southwest Airlines and the result.) 3. Choose no more than 10 ratios from Exhibit Two that you think are critically important in understanding Southwest Airlines. Compare those with the same 10 ratios for one of Southwest Airlines competitors. Note your team must decide what ratios are most important and what competitor should be used for the comparison. This is Exhibit 3. 4. Your textbook talks about common size financial statements beginning on page 531. Prepare common size income statements and balance sheets for Southwest Airlines for the12/31/2010 and 12/31/2009 financial statements. Include these as Exhibit Four. 5. Calculate the market value of Southwest Airlines' common stock at 12/31/2010 and 12/31/2009. (Total market value of common stock is the number of shares outstanding

times the market price per share.) Compare this market value to the book value of common stock equity at the same point in time. Put this information in Exhibit Five. The three page memo should be turned in no later than midnight (Gainesville time) on Saturday, October 22. As usual, please turn in a single WORD document that includes both your firm memo and all exhibits for the firm analysis. (The industry report should be a separate Word document and should be submitted to me on the Industry report assignment area.) The last page of this firm document should include a summary of what each member of the team did to complete this firm analysis.