Analyze the time-series of each company’s sales growth (i.e., growth in operating revenue). If you average sales growth over the 2015 through 2019 period, which airline is experiencing greater growth pre-COVID19? a) DELTA b) ALLEGIANT 2) Analyze each company’s gross margin (operating income, or EBIT, divided by operating revenue). Which company has better historical pre-COVID19 gross margins? a) DELTA b) ALLEGIANT 3) Understanding that depreciation expense is largely dependent on management decision making, recalculate gross margin but add depreciation and amortization back to EBIT; in other words, calculate gross margin using EBITDA. Does examining gross margin using EBITDA change your answer to question #2? a) Yes b) No
1) Analyze the time-series of each company’s sales growth (i.e., growth in operating revenue). If you average sales growth over the 2015 through 2019 period, which airline is experiencing greater growth pre-COVID19?
a) DELTA
b) ALLEGIANT
2) Analyze each company’s gross margin (operating income, or EBIT, divided by operating revenue). Which company has better historical pre-COVID19 gross margins?
a) DELTA
b) ALLEGIANT
3) Understanding that depreciation expense is largely dependent on management decision making, recalculate gross margin but add depreciation and amortization back to EBIT; in other words, calculate gross margin using EBITDA. Does examining gross margin using EBITDA change your answer to question #2?
a) Yes b) No
4) With respect to leverage, company _______ is more highly levered (i.e., has more debt) than company _______.
a) DELTA, ALLEGIANT
b) ALLEGIANT, DELTA
5) Compute ROE as NI ÷ (Average Owners’ Equity). Delta’s 2019 ROE is approximately _____ and Allegiant’s 2019 ROE is approximately ____.
6) Breakdown both company’s ROE using the Dupont framework. If Delta’s 2019 leverage ratio in the Dupont framework were equal to Allegiant’s 2019 leverage ratio, which company would have the higher 2019 ROE?
a) DELTA
b) ALLEGIANT
7) Using ROE as defined in #5, which company has the highest average ROE over the 2016-2019 period?
a) DELTA
b) ALLEGIANT
8) Using the net margin ratio, complete the following statement: In 2019, Delta earned approximately $0._____ of net income for every $1 of operating revenue, and Allegiant earned approximately $0._____ of net income for every $1 of operating revenue.
9) Based on the average financial data over the 2015-2019 period, and the financial statement ratio we discussed in class, which company would be considered a “value” buy relative to the other company? Note that this is asking for a naïve conclusion absent a robust intrinsic value computation using each firm’s
a) DELTA
b) ALLEGIANT
10) Compute the average Quick Ratio over the 2015-2019 period for each company. Which company has a relatively better grasp on liquidity in terms of being able to cover short-term obligations with its liquid assets?
a) DELTA
b) ALLEGIANT
11) Using the Return on Assets ratio (ROA = NI / Avg Total Assets), which company utilizes its assets more effectively to generate corporate profits?
a) DELTA
b) ALLEGIANT
12) Using three-year average sales growth, gross margin, net margin, ROE, return on assets, quick ratio, EBITDA interest coverage, and
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