T Group Project III for United Airlines
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Group Project III: United Airlines
BA 620-70-H4
Group Project III: United Airlines
Prepared by:
Group T
Abhilash Poolakunta - 583529
Anil Kumar Maduri - 551407
Shashikanth Reddy Kallem - 548353
Vishnu Puli - 564429
Vikravardhanjan Tatipamula - 546150
>
The industry title for United is United Airlines, Inc and the SIC code for United Airlines is
Group Project III: United Airlines
4592. Delta Airlines is chosen as the sole competitor to compare against United Airlines.
Ratio Analysis Worksheet
United Airlines
Delta Airlines
1.
Current Ratio
0.55
0.41
2.
Debt Ratio
0.78
0.76
3.
Gross profit margin
62.03
54.95
4.
Times interest earned
12.63
36.36
5.
Accounts receivable
turnover
31.01
18.19
6.
Inventory turnover
15.97
18.37
7.
Return on sales
9.94
14
8.
Asset turnover
0.85
0.75
9.
Return on Assets
5.92
7.64
10.
Return on Equity
5.92
7.64
1.
Current Ratio:
The current ratio is a liquidity ratio that measures a company's willingness to pay short-
term or due debt within one year. This shows investors and analysts how a business can boost its
current balance sheet assets to meet its current debt and other payables. The existing ratio
compares all of a corporation's current assets with its current liabilities. Usually these are defined
as (Kenton, W. 2020, January 29).
The existing ratio drawbacks include the difficulty of comparing the calculation across
industry groups, the overgeneralization of the actual asset and liability balances and the lack of
Group Project III: United Airlines
trend details. Large current ratios do not always represent a good sign for investors. If the current
ratio of the company is too high it may indicate that the company does not use its current assets
or short-term financing facilities effectively. If net assets are surpassed, the current ratio will be
less than 1 (Kenton, W. 2020, January 29).
According to the above comparison between United and Delta Airlines, It is clear that
United has a higher current ratio than Delta when the current ratio is taken as reference.
2.
Debt Ratio:
The debt ratio is a financial ratio that measures the extent of the leverage a business has.
The debt ratio, expressed as a decimal or percentage, is known as the ratio of total debt to total
assets. It can be defined as the debt-financed proportion of a company's assets (Hayes, A. 2020,
January 29).
A ratio greater than 1 shows a significant portion of the debt is financed by cash. Or put it
another way, the company has more liabilities than assets. A high ratio also indicates that a
company may be putting itself at a risk of default on its loans if interest rates were to rise
suddenly. A ratio below 1 translates to the fact that a greater portion of a company's assets is
funded by equity (Hayes, A. 2020, January 29).
3.
Gross profit margin:
The gross profit margin is a financial metric employed to assess a company's financial
safety. This means the proportion of the remaining funds after the elimination of the cost of
goods sold from the revenue figures. The higher the amount of the gross profit margin, the more
funds are available for reinvesting, saving and/or covering expenses.
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Group Project III: United Airlines
According to the above comparison between United and Delta Airlines, It is clear that
United has a higher Gross profit margin than Delta, when taken as reference.
4.
Times interest earned:
The amount of time interest gained tests an organisation's ability to pay its debt obligations.
Lenders typically use the ratio to determine if a prospective borrower can afford to take on any
additional debt. The ratio is calculated by comparing the earnings of a business that are available
for use in paying down the interest expense on debt, divided by the amount of interest expected.
According to the above comparison between United and Delta Airlines, It is clear that
Delta has a higher time interest earned ratio than United, when taken as reference.
5.
Accounts receivable turnover:
Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many
times a firm can turn its accounts receivable into cash over a period of time. In other words, the
accounts ' receivable turnover ratio determines how many times a firm will obtain the average
receivable accounts over the year.
According to the above comparison between United and Delta Airlines, It is clear that
United has a higher Accounts receivable turnover than Delta, when taken as reference.
6.
Inventory turnover:
Inventory turnover is a measure representing the number of times inventory is sold or
used over a given period of time. Also known as inventory turns, stock turns, and stock turnover,
Group Project III: United Airlines
the inventory turnover formula is calculated by dividing the cost of the sold goods (COGS) by
average inventory (Katula, D. 2017, November 21).
According to the above comparison between United and Delta Airlines, It is clear that
Delta has a higher time inventory turnover ratio than United, when taken as reference.
7.
Return on Sales (ROS)
: Operational proficiency of a company can be determined
through ROS, which can be further defined as the profit produced for every dollar of the
company sales. The higher the ROS, the better the company is performing. The ROS for United
is 9.94 which is lower than the Delta 14.
8.
Asset Turnover
: The ability of a company to produce sales through its assets by
comparing total assets with net sales which shows how a company can generate sales through its
assets. The higher the Asset turnover, the better the company is performing. United’s 0.85 is
better than Delta’s 0.74
9.
Return on Assets (ROA):
It implies how well a company can make the best use of its
assets and abstract the profit. The higher the ROA the better the company is performing. ROA of
United’s 5.92 is lower than Delta’s 7.64.
10.
Return on Equity (ROE):
It can be defined as the profitability ratio that a company
is able to generate profits from its shareholders. The higher the ROE, the better the company is
performing (ROE, 2020 February 15). ROE of United’s 5.92 is lower than Delta’s 7.64.
Group Project III: United Airlines
Conclusion:
After comparing all the values of the ratios, it is very much evident that Delta is
performing better than United in the majority of the fields. In t\aspects such as Debt ratio, Gross
profit MArgin, Accounts receivable turnover and Asset turnover, United Airlines is performing
better than the Delta.
References:
●
UAL.OQ - United Airlines Holdings Inc Key Metrics. (n.d.). Retrieved February 15,
2020, from
https://www.reuters.com/companies/UAL.OQ/key-metrics
●
Kenton, W. (2020, January 29). Current Ratio. Retrieved February 15, 2020, from
●
https://www.investopedia.com/terms/c/currentratio.asp
●
Return on Equity (ROE): Formula: Example: Ratio Calculation. (n.d.). Retrieved
February 15, 2020, from
https://www.myaccountingcourse.com/financial-ratios/return-
on-equity
●
Hayes, A. (2020, January 29). Debt Ratio. Retrieved from
https://www.investopedia.com/terms/d/debtratio.asp
●
Ratio Analysis: Classification of Liquidity Ratio. (2018, October 10). Retrieved from
https://www.edupristine.com/blog/ratio-analysis-classification-ratios-liquidity-ratio
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