MBA FPX 5010 Assessment 1 Training Manual-Accounting Tools and Practices

Student Name

Capella University

MBA-FPX5010 Accounting Methods for Leaders

Prof. Name

Date

Introduction: Southwest Airlines Co.

Southwest Airlines began its service in the lower 48 states in 1971 from Dallas, Texas, expanded to Puerto Rico in 2013, and initiated international service in 2014. The airline employs a blue ocean business strategy, focusing on creating new market spaces rather than competing in existing ones. Key investor metrics for the company include the quick ratio, return on assets, and debt-to-capitalization ratio. Additionally, airline-specific metrics such as available seat miles, cost and revenue per seat mile, and break-even load factor are essential for evaluating performance.

Figures and Data Analysis

Figure 1.1 illustrates the scatterplot of the highest stock prices of Southwest Airlines, along with a 100-day moving average based on data from Yahoo! Finance (2022).

Figure 1.2 presents the scatterplot of the lowest stock prices, also with a 100-day moving average from the same source.

Figure 2.1 shows a histogram of the adjusted closing stock prices of Southwest Airlines, indicating the frequency of occurrences across various price ranges.

Figure 2.2 depicts a histogram of the stock volume for Southwest Airlines, highlighting the number of occurrences across different volume ranges.

Descriptive Statistics: Comparison of Southwest Airlines and U.S. Legacy Airline Carriers

The analysis from July 12, 2017, to July 11, 2022, compares Southwest Airlines with other major carriers, including United, Delta, and American Airlines. The mean, median, and standard deviation of stock prices and daily stock volumes are presented to provide insights into performance.

Scatterplot and Histogram Analysis

Over the past five years, the scatterplots indicate a gradual decline in both the highest and lowest stock prices. A significant decline and subsequent spike occurred from March to June 2020, attributed to the COVID-19 pandemic. The fact that the highest and lowest stock prices have fallen below their moving averages suggests potential challenges in rising above these averages in the future (Stock signals, 2022).

The scatterplot analysis reveals that most adjusted closing stock prices are concentrated in higher value ranges, indicating a higher probability of substantial losses alongside frequent small gains. The high volatility of 86.98% is attributed to unexpected earnings results and the impact of industry or company news.

Conclusion

As of July 2022, Southwest Airlines has regained its pre-pandemic employee count. Additionally, Saudi Arabia’s commitment to increasing oil production levels by 50% for the U.S. may help lower fuel costs, which could positively impact Southwest’s stock prices. However, the unstable economy and high fuel prices, coupled with declining stock prices, pose challenges for stock purchases. Currently, Zacks Investment Research has rated Southwest as a “Hold,” placing it in the bottom 15% of the airline industry.

Recommendations

Given the volatility of fuel costs and the potential for economic recessions, it is crucial for Southwest Airlines to navigate the highly competitive airline industry, which is susceptible to unpredictable external factors.

Discussion and Questions

Thank You!

References

Bova, T. (2020, November 17). Salesforce Brandvoice: Southwest on the importance of employee experience. Forbes. Retrieved from https://www.forbes.com/sites/salesforce/2020/11/17/southwest-on-the-importance-of-employee-experience/?sh=9e034c5f7ae6

CFI Team. (2022, May 7). Negatively skewed distribution. Corporate Finance Institute. Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/other/negatively-skewed-distribution/#:~:text=What%20is%20a%20Negatively%20Skewed,the%20distribution%20graph%20is%20longer.

Johnson, M. (2020, June 4). Why did airline stocks skyrocket on Thursday? Zacks Investment Research. Retrieved from https://www.zacks.com/stock/news/964436/why-did-airline-stocks-skyrocket-on-thursday

Lake, R. (2022, April 12). Should you pay attention to a stock’s trading volume? SmartAsset. Retrieved from https://smartasset.com/financial-advisor/high-volume-stocks#:~:text=Stocks%20can%20be%20categorized%20as,or%20more%20shares%20per%20day.

The Geography of Transport Systems. (2022, June 25). Market share of the top American Airlines, 1977-2022. Retrieved from https://transportgeography.org/contents/chapter5/air-transport/airline-market-share-united-states/

Maverick, J. B. (2022, March 28). Key financial ratios for airline companies. Investopedia. Retrieved from https://www.investopedia.com/articles/active-trading/082615/key-financial-ratios-analyze-airline-companies.asp

Morah, C. (2021, July 28). Are stocks with large daily volume less volatile? Investopedia. Retrieved from https://www.investopedia.com/ask/answers/09/daily-volume-volatility.asp#:~:text=The%20relationship%20between%20a%20stock’s,higher%20volatility%20and%20vice%20versa.

Purpose, vision, and the Southwest way. (n.d.). Southwest Airlines. Retrieved from https://www.southwestairlinesinvestorrelations.com/our-company/purpose-vision-and-the-southwest-way

Southwest Airlines achieves hiring milestone by increasing employee count beyond pre-pandemic 2019 levels. (2022, July 15). Southwest Airlines Newsroom. Retrieved from https://www.swamedia.com/releases/southwest-airlines-achieves-hiring-milestone-by-increasing-employee-count-beyond-pre-pandemic-2019-levels

Southwest Airlines announces offering of common stock and convertible senior notes due 2025. (2020, April 28). PRNewswire. Retrieved from https://www.prnewswire.com/news-releases/southwest-airlines-announces-offering-of-common-stock-and-convertible-senior-notes-due-2025-301048250.html

Southwest Airlines (LUV). (2022, July 17). Zacks Investment Research. Retrieved from https://www.zacks.com/stock/research/LUV/key-company-metrics

Southwest Corporate Fact sheet. (n.d.). Southwest Airlines Newsroom. Retrieved from https://www.swamedia.com/pages/corporate-factsheet#:~:text=Southwest%20Airlines%20was%20incorporated%20in,the%20billion%2Ddollar%20revenue%20mark.

Stock signals: US stocks indicator & average. (2022, June 17). Fidelity. Retrieved from https://www.fidelity.com/viewpoints/active-investor/moving-averages

The United States Government. (2022, July 15). Fact sheet: Results of bilateral meeting between the United States and the Kingdom of Saudi Arabia. The White House. Retrieved from https://www.whitehouse.gov/briefing-room/statements-releases/2022/07/15/fact-sheet-results-of-bilateral-meeting-between-the-united-states-and-the-kingdom-of-saudi-arabia/

Yahoo! (2022, July 17). American Airlines Group Inc. (AAL) Stock Historical Prices & Data. Yahoo! Finance. Retrieved from https://finance.yahoo.com/quote/AAL/history?period1=1499817600&period2=1657584000&interval=1d&filter=history&frequency=1d&includeAdjustedClose=true

MBA FPX 5010 Assessment 1 Training Manual-Accounting Tools and Practices

Yahoo! (2022, July 17). Delta Air Lines, Inc. (DAL) Stock Historical Prices & Data. Yahoo! Finance. Retrieved from https://finance.yahoo.com/quote/DAL/history?period1=1499817600&period2=1657584000&interval=1d&filter=history&frequency=1d&includeAdjustedClose=true

Yahoo! (2022, July 12). Southwest Airlines Co. (LUV) Stock Historical Prices & Data. Yahoo! Finance. Retrieved from https://finance.yahoo.com/quote/LUV/history?period1=1499817600&period2=1657584000&interval=1d&filter=history&frequency=1d&includeAdjustedClose=true

Yahoo! (2022, July 17). United Airlines Holdings, Inc. (UAL) stock historical prices & data. Yahoo! Finance. Retrieved from https://finance.yahoo.com/quote/UAL/history?period1=1499817600&period2=1657584000&interval=1d&filter=history&frequency=1d&includeAdjustedClose=true