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You have been presented with the following selected information

Resolved Question:

You have been presented with the following selected information taken from the financial statements of Southwest Airlines Co.

SOUTHWEST AIRLINES CO.
Balance Sheet (partial)
December 31
(in millions)

2006 2005
Total current assets $2,601 $3,620
Noncurrent assets
10,859

10,383

Total assets
$13,460

$14,003


Current liabilities $2,887 $3,848
Long-term liabilities
4,124

3,480

Total liabilities 7,011 7,328
Shareholders' equity
6,449

6,675

Total liabilities and shareholders' equity
$13,460

$14,003

Other information:
2006 2005
Net income (loss) $499 $484
Income tax expense 291 295
Interest expense 128 122
Cash provided by operations 1,406 2,118
Capital expenditures 1,399 1,146
Cash dividends 14 14

Note 8. Leases
The majority of the Company's terminal operations space, as well as 84 aircraft, were under operating leases at December 31, 2006. Future minimum lease payments under noncancelable operating leases are as follows: 2007, $360,000; 2008 $318,000; 2009, $280,000; 2010, $250,000; 2011, $203,000; after 2011, $1,000,000.




Comment on the trend in ratios.





Read the company's note on leases. If the operating leases had instead been accounted for like a purchase, assets and liabilities would increase by approximately $1,500 million. Recalculate the debt to total assets ratio for 2006 in light of this information, and discuss the implictions for analysis.
Submitted: 2 years ago.
Category: Homework
Expert:  F. Naz replied 2 years ago.
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