August 16, 2015
Assignment 1: Financial Analysis
Professor Womack
ACC 556: Financial Accounting for Managers
Background
Delta Airlines is one of the world’s largest global airlines, transporting over 160 million travelers a year. Founded in 1928, Delta now employs close to $80,000 people worldwide and maintains over 700 aircrafts (Delta Airlines, Inc.). As one of FORTUNE magazine’s top 50 companies to work for in the world, Delta has truly distinguished themselves from other airlines over the years.
Delta's Financial Analysis
2014
2013
2012
Current Ratio
0.74
0.68
0.62
ROA % (net)
1.24
21.78
2.29
Debt to Assets
0.83
0.78
0.80
Reasons for Investing
As depicted in the chart above, Delta’s current ratio in 2014 was 0.74. This shows that Delta’s liabilities outweigh their current assets. Although this liquidity ratio has increased over the last three years, this is an indication of Delta’s ability to pay its short term obligations and unexpected needs for cash (Kimmel, P.D.). Based solely off of the current ratio, Delta is not a profitable company to invest in because for every 1 dollar in liabilities they have, they only have .74 cents in assets.
One way Delta’s profitability is measured is by determining the return on assets ratio for the company. Return on assets indicates the amount of net income generated by each dollar of assets (Kimmel, P.D.). Through financial analysis, it is determined that Delta’s ROA is 1.24 for the previous year. For every dollar in assets, Delta receives in return $1.24. As an investor, this is positive news and would be a benefit for investing in the company.
As it relates to Delta’s solvency, the company saw an increase in their assets over 2013-2014, as well as an increase in their liabilities. Delta’s debt to asset ratio fluctuates over the 3 year period however investors would be wise to invest in the company because the history shows they have the ability...