Essentials of Managerial Finance Essay Example | Topics and Well Written Essays - 500 words

Essentials of Managerial Finance - Essay Example Furthermore, although there is insufficient liquid assets to fulfill present responsibilities, Functional Profits are in plenty and hence sufficient to facilitate the debt. In the airplane industry the debtors that owe Southwest airlines are among the worst with 7.75 days’ worth of unsettled earnings. This suggests that sales need to be dealt with in a more appropriate and effective manner. Last, records appear to be thriving managed as the Inventory Processing Period is characteristic for the business, at 10.08 days. According to Southwest airline’s statement of returned earnings in 2010, they had earnings of $0.74 per share on 01/20/2011. The liquidity ratio which is normally the ratio of the current assets over the current liabilities is used to determine whether Southwest airlines can meet their short term financial responsibilities. Their liquidity ratio was 1 meaning their current assets was equal to their liabilities. The asset management ratio shows whether the assets of southwestern airlines are being utilized appropriately. Their assert management ratio was 0.8 and hence meaning they were slightly below the safe level of asset management ratio. The debt management ratio which is also commonly known as financial leverage ratio will determine the probability of the firm going bankrupt or experiencing financial upheavals in the future. The debt management ratio proved to be at a good level of 58.8. The market value ratio generally looks into the performance of Southwest Airlines in the stock market. Their market value ratio was at 8.99% Financial statements are used by the major shareholders and owners of the firm to be able to make sound decisions regarding investing in corporations and also to be able to see which areas the firm need to be improved. It is also a detailed analysis of the financial health of the corporation and hence investors get a clear view of the fairing of the corporation. Financial statements are also