ABSTRACT
This chapter explains the various ratios that might be used in performing ratio analysis by using these ratios to analyze the financial statements of Southwest Airlines. While all the ratios can be used to adequately describe the financial position of a company, the uniqueness of the airline industry requires additional calculations to understand the finances of an airline. While liquidity ratios help analyze a company's financial position in the short-term, long-term risk ratios, or solvency ratios, analyze a company's ability to remain in business over the long-term. The final group of ratios that can be used to analyze a company are stock market ratios; these ratios are used to analyze a company in relationship to its equity position. The chapter discusses financial ratio analysis using measures of profitability, liquidity, stock market, and operational metrics. Comparisons of ratios with different industries would be meaningless.
