Question

Suppose you have been presented with selected information taken from the financial statements of Southwest Airlines Co., shown below.

SOUTHWEST AIRLINES CO. Balance Sheet (partial) December 31 (in millions)
		2022			2021
Total current assets		$2,780			$4,300
Noncurrent assets		10,300			12,615
Total assets		$13,080			$16,915
Current liabilities		$2,780			$4,890
Long-term liabilities		6,480			5,190
Total liabilities		9,260			10,080
Shareholders’ equity		3,820			6,835
Total liabilities and shareholders’ equity		$13,080			$16,915
Other information:
		2022			2021
Net income (loss)		$ 150			$ 685
Income tax expense		100			400
Interest expense		125			111
Cash provided by operations		(1,585	)		2,720
Capital expenditures		905			1,435
Cash dividends		15			16

(a) Calculate each of the following ratios for 2022 and 2021.

				2022			2021
1.		Current ratio (Round answers to 2 decimal places, e.g. 6.25:1.)		enter current ratio rounded to 2 decimal places	:1		enter current ratio rounded to 2 decimal places	:1
2.		Free cash flow (Enter negative amounts using either a negative sign preceding the number -45 or parenthesis e.g. (45).)		$enter a dollar amount			$enter a dollar amount
3.		Debt to assets ratio (Round answers to 0 decimal places, e.g. 62%.)		enter percentages rounded to 0 decimal places	%		enter percentages rounded to 0 decimal places	%
4.		Times interest earned (Round answers to 2 decimal places, e.g. 6.25.)		enter times interest earned rounded to 2 decimal places	times		enter times interest earned rounded to 2 decimal places	time

Answer 1

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Southwest Airlines Co.,	$ Millions	$ Millions
Income Statement	2022	2021		Ans 1	2022	2021
Net Income	150.00	685.00		Current Ratio	1.00	0.88
Add: Income tax	100.00	400.00		Current Assets/Current Liabilities
Net Income before taxes	250.00	1,085.00
Add: Interest Expense	125.00	111.00		Ans 2
Earning before Interest & Taxes	375.00	1,196.00		Free Cash Flow	(2,505.00)	1,269.00
				Net cash provided by operating activities- Capital expenditures- Dividends
Balance Sheet
Assets	2022	2021		Ans 3
Current Assets	2,780.00	4,300.00		Debt to Assets Ratio	70.80%	59.59%
Non Current Assets	10,300.00	12,615.00		Total Liabilities /Total Assets
Total Assets	13,080.00	16,915.00
				Ans 4
Current Liabilities	2,780.00	4,890.00		Times Interest Earned	3.00	10.77
Long Term liabilities	6,480.00	5,190.00		Earning before Interest & Taxes/Interest Expense
Total Liabilities	9,260.00	10,080.00
Total Stockholders' Equity	3,820.00	6,835.00
Total Liabilities & Stockholders' Equity	13,080.00	16,915.00
Cash provided by operations	(1,585.00)	2,720.00
Capital expenditures	905.00	1,435.00
Dividends	15.00	16.00