Question

3. Using the attached excerpts from Southwest Airlines Ce's 2019 Annual Report answer the following questions, In addition: All numbers are in Smillions (except per share data). Provide calculations when necessary, a. Long-term Assets i) What is the net book value (NBV) of Southwest's property, plant and equipment as of December 31, 2019? What is the balance of Southwest's accumulated depreciation account as of December 31, 2019? ii) b. Shares Issued and Outstanding i) ii) How many shares of Common Stock were authorized as of December 31, 2019? How many had been issued as of December 31, 2019? Southwest also has repurchased some of its own shares of stock that had been previously issued (i.e. Treasury Stock). How many shares did Southwest hold as Treasury Stock as of December 31, 2019? How many shares of Southwest's Common Stock were outstanding, as of December 31, 2019? iii) C. Common Stock i) ii) What is the par value of each share of common stock issued? How much money in excess of the par value of the stock (i.e. Additional Paid in Capital, or APIC) had been contributed by shareholders as of the end of 2019 (hint: this is listed as Capital in Excess of Par Value on the balance sheet)? d. Equity analysis: i) ii) What is Southwest's Earnings Per Share (Basic) for the fiscal year ended 12/31/2019? What is the Return on Equity (ROE) for Southwest for the fiscal year ended 12/31/2019? (NOTE: when calculating average equity for the denominator of ROE, for the 12/31/2018 ending equity balance, use the reported balance number, $9,853 Average that amount with the 12/31/2019 ending equity balance to calculate average equity for the period)

Answer 1

A) Long term Assets

(i) Net Book Value of assets = Total Cost of Aseets - Depreciation = $27,713,000,000-($10,688,000,000+$1,219,000,000) = $15,806,000,000

(ii) Accumulated Depreciation account balance as on 31st december 2019 = $10,688,000,000+$1,219,000,000 = $11,907,000,000

B) Shares Issued and Outstanding

(i) Authorised No:of shares = 2,000,000,000

No: of Shares Issued = 807,611,634

(ii) No: of shares asTreasury Stock = 288,547,318

(iii) No:of outstanding Shares = 807,611,634 - 288,547,318 = 519,064,020

C) Common Stock

(i) Par value of Each share = $1.00

(ii) Capital in excess of par value = $1,581,000,000

D) Equity Analysis

(i) Earnings Per share (Basic) = $4.28

(ii) ROE = (Net Income/Average Equity)*100

ROE = [$2,300,000,000 / { ($9,832,000,000+$9,853,000,000)/2}] *100= 23.36%