Question

The income statement is extremely important to all users of financial statements. It is important to you in selecting a corporation that will survive, remain profitable and provide you phenomenal stock options. It is important to managers since it is one of the primary tools that is to evaluate their performance. It is important to lenders who want to make sure their interest and principal can be repaid. It is the most important financial statement to investors and the stock market price. You need to understand the income statement to know how to improve corporate profitability. A lower cost of goods sold will generate a higher gross profit. Downsizing and outsourcing will generate a higher operating profit. Lowering other expenses will increase net profit. In order to understand the income statement you need to spend the time to read, compare and analyze those reports which is what we are about to do. After 9/11 the only major U.S. airline that remained profitable was Southwest Airlines. Many airlines were forced into bankruptcy despite significant government assistance. Examine the corporation’s web site, annual report and 10-K. Pay particular attention to the company’s income statement. Click the link in Step One (which will open a new browser window) and then follow the steps on screen by clicking back and forth between the two windows. Go to the SEC website (Links to an external site.) Links to an external site. . (Links to an external site.) Links to an external site. Go to the Filings tab: Company Filing Search. In the company name box enter “Southwest Airlines” and search. In the Filing Type box enter “10-K” and search. Select the 10-K for 2005 filing date. Select: d21965e10vk.htm. Direct link (Links to an external site.) Links to an external site. . Discuss financial and non-financial reasons why Southwest Airlines is able to remain profitable compared to its competitors. Cite your sources in parenthesis for others. Comment on: Financial reasons: Non-financial reason Don’t forget the Thompson Learning Business & Company Resource Center (BCRC): BCRC (Links to an external site.) Links to an external site. And the Thomson ONE – Business School Edition Web site: Thompson One – Business School Edition (Links to an external site.) Links to an external site.