Vertical Analysis of a Balance Sheet
A condensed balance sheet for Southwest Airlines and a partially completed vertical analysis are
presented below.
SOUTHWEST AIRLINES Balance Sheet (summarized) December 31, 2008 (in millions of U.S. dollars) | |||||
Cash | $ 1,803 | 13% | Current Liabilities | $ 2,806 | (b)% |
Accounts Receivable | 209 | 1 | Long-Term Liabilities | 6,549 | 45 |
Inventory of Parts and Supplies | 203 | 1 | Total Liabilities | 9,355 | 65 |
Other Current Assets | 678 | 5 | Contributed Capital | 1,018 | 7 |
Property and Equipment, Net | 11,040 | (a) | Retained Earnings | 3,935 | 28 |
Other Assets | 375 | 3 | Total Stockholder’s Equity | 4,953 | (c) |
Total Assets | $14,308 | 100% | Total Liabilities&Stockholders’ Equity | $14,308 | 100% |
Required:
1.Complete the vertical analysis by computing each line item (a)–(c) as a percentage of total assets. Round to the nearest whole percentage.
2.What percentages of Southwest’s assets relate to inventory of parts and supplies versus property and equipment? What does this tell you about the relative significance of these two assets to Southwest’s business?
3.What percentage of Southwest’s assets is financed by total stockholders’ equity? By total liabilities?
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