 PERFORMANCE ASSESSMENT OF MAJOR U.S. AIRLINES VIA CASH FLOW RATIOSStepanyan Armen ()
Annals of Faculty of Economics, 2013, vol. 1, issue 2, 398-408 Abstract: The paper addresses the assessment of major U.S. airlinesâ€(tm) liquidity and solvency based on information disclosed in the statements of cash flows as part of their 10-K Form annual reports filed with the Securities and Exchange Commission. Conducting financial statement analysis for major U.S. airlines has generated deep interest in and a significant importance towards using various frequently used cash flow ratios to gauge U.S. airlinesâ€(tm) viability both in the short term and long term in that cash flow information is more reliable and more revealing. The main purpose of this paper is to gain a thorough insight into the financial performance of U.S. airlines for the last five consecutive years using cash flow information as a supplement to the traditional ratio analysis. For this analysis various cash flow ratios for measuring a companyâ€(tm)s liquidity and going concern status are used and described. The paper covers the cash flow analysis for both the legacy carriers (Delta Airlines Inc., United Airlines Inc, American Airlines Inc, Continental Airlines Inc., US Airways Inc) which had been founded before the passing of the U.S. airline deregulation act in 1978 and two major low-cost carriers (Southwest Airlines Co. and JetBlue Airways). All cash flow ratios for the selected U.S. carriers have been calculated based on information from their three main financial statements: the balance sheet, income statement and the statement of cash flows for the period from 2007 to 2011.The U.S. airline industry has been significantly affected by the recent economic crisis and skyrocketing jet fuel prices. Therefore, the results of the cash flow analysis show that for the most part selected U.S. airlines have liquidity problems and are likely to face financial difficulties in terms of meeting ongoing financial commitments in the long term which, in fact, explains why major U.S. airlines are highly leveraged being dependent on external sources of financing. The paper may be useful for those who have interest in financial statement analysis. Keywords: Cash flow; ratio analysis; financial statement; earnings; liquidity; airline industry (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ora:journl:v:1:y:2013:i:2:p:398-408 Access Statistics for this article More articles in Annals of Faculty of Economics from University of Oradea, Faculty of Economics Contact information at EDIRC. |
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