Equity Research Report

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Running head: EQUITY RESEARCH REPORT 1

Equity Research Report

Name of Student

Wilmington University

EQUITY RESEARCH REPORT 2

Basic Information

With the Equity Research Report, we are going to examine the financial ratio analysis,

valuation analysis, investment risk factors and other information found in the financial

statements of American Airline and Southwest. The financial analysis procedure will involve

examination of various ratios, which may include liquidity ratios, activity ratios and debt ratios.

Others include profitability ratios, efficiency ratios and market ratios. In the evaluation of the

performance of the two companies, we will also conduct cash flow analysis and compare the

weighted average cost of capital of the two companies.

Analyst Opinion

The current ratio of American Airline is higher than that of the SouthWest Company.

This means that American Airline is better placed in terms of paying its assets in time. Since

current ratio measures the financial health of the company, the company with a higher current

ratio, in our case, American Airline has a higher probability of paying its obligations such as debt

and creditors using its assets such as inventory and accounts receivable. On the other hand, the

performance of the two companies is below per as per the statistics of the current ratio. From the

financial accounting concept, a good performing company should have a current ratio of greater

than one and it’s an indicator of higher strength of paying obligations when they fall due.

Unfortunately, American Airline and SouthWest both have a ratio of lesser than one. With their

low current ratio, it does not necessarily mean that both companies will go bankrupt. The main

contributing factor to this argument is that companies have several ways of accessing finance

especially when they have realistic expectations of potential future income that they can use to

pay their debts (Fridson &Alvarez, 2011). As such the company can have a current ratio of lesser

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Running head: EQUITY RESEARCH REPORT Equity Research Report Name of Student Wilmington University 1 EQUITY RESEARCH REPORT 2 Basic Information With the Equity Research Report, we are going to examine the financial ratio analysis, valuation analysis, investment risk factors and other information found in the financial statements of American Airline and Southwest. The financial analysis procedure will involve examination of various ratios, which may include liquidity ratios, activity ratios and debt ratios. Others include profitability ratios, efficiency ratios and market ratios. In the evaluation of the performance of the two companies, we will also conduct cash flow analysis and compare the weighted average cost of capital of the two companies. Analyst Opinion The current ratio of American Airline is higher than that of the SouthWest Company. This means that American Airline is better placed in terms of paying its assets in time. Since current ratio measures the financial health of the company, the company with a higher current ratio, in our case, American Airline has a higher probability of paying its obligations such as debt and creditors using its assets such as inventory and accounts receivable. On the other hand, the performance of the two companies is below per as per the statistics of the current ratio. From the financial accounting concept, a good performing company should have a current ratio of greater than one and it’s an indicator of higher strength of pay ...
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