Countersign Alumni Chapter Annual Report Made Easy

Countersign alumni chapter annual report

hey all my name is Paul barosky and I am the owner of quality business plan and what I'd like to do today is introduce y'all to my Southwest Airlines financial report for 2019 so the purpose of this video is just to go ahead and walk you all through my thought process and my financial model as to how I identify some of the trends that I choose to discuss in my finance report now a please keep in mind first and foremost the excel template the spreadsheet the financial model that I use is not included in the financial report what I do is I take pieces out of that financial model I put it into the report and then I go ahead and I introduce the information I discuss the highlights from the financial statements the income statement balance sheet and the ratios also please keep in mind when I'm doing the initial analysis I might say some things that are contradictory for example I might say a company has too much equity in one position and then I'm gonna say they might not have enough equity and it's a different situation so yeah some of these ratios or some of these findings are gonna kind of direct each other but that's just the essence of in the wonders and the you'll beautiful the beauty of Finance is you know you have to have a starting point you have to make some observations and then you have to go and you have to find the stuff you have to do some additional research so the point of my report it and I'll show you how to report at the end of the video but the purpose of the report in the this video is just to kind of introduce you all to the starting point of financial analysis alright so without further ado let's go ahead and dive right into let's take a let's take a peek at I'm Southwest Airlines and you'll see what's happening with this organization here alright so first and foremost when I start buying a financial analysis for any company I'm gonna go ahead and take a look at the executive team now the information I would get this information from Yahoo Finance and so what they're telling me here is that the the organization's not being very transparent with their pay for the CEO we do know that the president on whatever he may do as compared to the CEO but the president's making 1.3 million I'm comparing that to other organizations multinational organizations that's about in line with computation you know for that kind of position the executive team unfortunately though the other information for the other compensations for the other employees was not readily available a little bit disappointing and it may lead to you know the thoughts or ideas from investors that they're not being very transparent but again that's just a first take next thing is going to be the stock price when I did on when I gather my information for the stock price I did do this back in February I'm so granted that the stock price definitely has has changed significantly you know thanks to this virus that's spreading around the world but anyways at this point in time from February of 2019 until February February 18th of 2020 the stock had barely moved I mean we have you know of course had some fluctuations in between it you know it had some lows at $48 and it had some peaks close to I'm 58 dollars didn't know so they closed a close close to the peak so what we can take away from this stock price right here as first and foremost I love how we have a lot of different lows we got 48 here we got 48 we got close to 48 here great opportunities and we know that you know based on this trend right here that we can sell it 54 numerous times all over the board and we're going to be ok unfortunately though at you know current stock price trend is you know being dictated by the market as compared to individual industries so you know take that forward it is right now we have the annual growth rate of one point one three percent so just based on this point in time annual growth rate at one point one three percent not very you know not very impressive at all I mean it's you know it's definitely well below what the markets returning the overall markets returning but fortunately the next space is going to give us a confidence and ease factor to consider to invest in the organization and that compensating factor that I just mentioned is going to be their dividend 27 cents might not be you know something that's no crazy impressive for a dividend payout however what isn't impressive is their growth rate every other year their pain their increasing their growth rate by 30 some-odd percent so in 16 they kicked up the growth rate for their dividends at 37 percent you know they still had an above average growth rate for their dividends at 19 percent for 17 and they went above and beyond again in 18 at 36 percent so I mean this growth rate is phenomenal for their dividends and then 19 was 16 percent so definitely compensating factor if an investor is looking to you know invest in a fixed income this is definitely a fixed income with an one heck of a growth rate for the dividend payouts alright next thing is going to be the income statement so when I take a look at the income statement first thing we're gonna do is just take a just you know peruse the income statement you know see if we got some revenue growth and we do you know we got nineteen point eight billion down to nineteen and then we've got a steady growth for the next three years not too shabby then I'm gonna go slide down to the net profits so we getting that profits at about you know 2.1 2.1 3.39 2.4 2.8 so the net profits you know they're really not changing so we've got some growth rates here but you know this seems like you're over at a board with their net profit so that kind of tells us you know it tells us to know yes they're growing you know at a pretty consistent pace but you know they've got some issues in here with their revenue with their cost I'm not sure where the issues are but we'll find out alright so once I'm done with just perusing this income statement in general I'm gonna break out this information and I'm gonna take a look at this line by line you know so we've got an average growth rate for the last five years at three point three percent for my multinational corporation that's okay you know I've seen better I've seen worse but it's really really not crazy impressive you know three point three percent it's alright excusing so it's okay nothing nothing to write home about but here's where the concern sets in their cost of goods as compared to revenues is is growing at about nine point seven percent annually so that what that means is there cost of goods what they pay for their gasoline what they pay for you know their goods you know that they use in order to service their customers that price is growing at almost 10% their revenues are only growing at 3% this cannot be sustained you can't be growing three times you can't your cost cannot be growing three times as fast as your revenue growth something's got to give your cut your gross profit margins gonna get killed eventually and it's gonna be sooner rather than later so what the company inevitably is going to be faced with is either they're gonna have to higher the prices or they're gonna have to significantly cut their cost in operations to make up for this and that's only a short-term solution they're gonna eventually have to you know come to they'll come to terms with you know this right here they gotta so let's cause a good growth down or they got to pick the revenue growth up all right next thing we're gonna slide over to is going to be it's gonna be the balance sheet now for the balance sheet you know what people want to start with the cash position that really doesn't tell you a whole heck of a lot what I'd like to look at first and foremost it's gonna be that short-term investments if an organization is used in short term investments a that tells you they're definitely going to be solvent but they should be solvent for the next 12 months and be the company is putting their cash to work they're not just leaving a bunch of cash in their checking account they're they're making some kind of interest that they're utilizing that asset to its optimal usage so you know instead of just leaving in a checking account earning zero interest at least they're putting it somewhere and there's some kind of a short-term investment and they're making a little bit of money but they're not going to do that if they didn't have enough cash to support operations so that tells us for the short term just based on a preliminary review they're doing okay with their their cash so that they're not going to be running insolvent any time soon based on that assessment I'm the next thing that I like to sneak a peek at is going to be property plant and equipment now if a property plant and equipment is growing then that tells us that the executive team feels that they need fixed assets to support long-term growth if the property plant and equipment is following reducing that means the company has too much for the most part this company has too much and they need to sell some of these fixed assets to better align their fixed assets with their projected revenues so from that foundation from that perspective what we can take away is that in 2015 Southworth heir had a twenty four point six billion dollars in fixed assets and they were able to increase they increase that for the next four years tells us that the executive team feels that they need more fixed assets to support long-term growth however in 2019 these jokers had to liquidate some of their property coal plant equipment so they went from twenty twenty-nine point two billion to twenty-seven point seven billion dollars if this trend continues that should tell investors or that may tell investors that the executive team feels that they have too many assets to support long term growth the revenues are not going to grow as fast as they thought they were or the revenues are going to taper off whether it's just for the company or for the industry who knows we just know they're putting themselves in a position where they're gonna have less assets we should assume that revenues are gonna slow down now for everyone who starts slowing down and remember that we just talked about cost of goods and those still go up they're really putting themselves into a pickle here that might be crunched to the arm very soon all right so keep that in mind next thing we're gonna send ID over to is gonna be the ratios current ratios my favorite ratio obvious like the king of all ratios is in my most humble of opinions so for the current ratio all that is is you've got your current assets upstairs and your in your numerator you've got your current liabilities downstairs in the denominator so what that tells us is that if the current assets are worth more than the current liabilities then we can take away that the company is going to be solvent so if the current assets upstairs is greater than is a bigger number than the current liabilities the answer should be 1.0 or above 1.01 or above so with this company right here their current ratio is 0.5 for that tells us that their current liabilities are almost double what their current assets are now they improve that ratio slightly over the next four years but what we can see right here is they've got this trending they're bouncing between point six four and point seven so that's a nice tight little area for which they're keeping that current ratio and when they've got the and they've got two short-term investments going on that tells us that they've got enough cash so they're comfortable with their current ratio being point six four point seven and they do have revenues coming in on a daily basis they are it's the only tickets on top of tickets on top of tickets on top of tickets so they do have revenues coming in on a continuous basis so as investors you may be able to assume that the company has a business model set where they've got enough cash coming in to go ahead and take care of operations and still have enough excess of money to go ahead and invest in short term short term assets so what that tells us is they're doing okay with the current ratio even though it's a little bit low they're doing okay now if this organization starts liquidating their short-term investments in this current ratio starts going down or stays the same then investors need to take a different view and it should be a pessimistic one all right next thing that's going to be fixed asset turnover so the fix out turnover that all that means is how well is the management team using their property plant and equipment from our observation here there are any in 2015 at point 8 for the next two years they're using their fixed assets less optimally granted in the next two years they have improved that and for the last year they actually exceeded you know their highest range which is a fantastic and one of the reasons they very well could have done this is because they've liquid liquidate is some of their property plant and equipment now if the organization continues this trend fantastic they're using their fixed assets at a more optimal level however if they're not able to sustain the revenues and they're still liquidating their property plant equipment something's going to happen this it's gonna affect their operations in some way shape or form you know whether they're gonna run out of enough planes or something I don't know conveyor belts whatever but they can't continue to liquidate this forever they just need to bring this into alignment just you know to reach optimization final thing I want to talk about here is going to be the return on equity the company ended 2015 with a twenty nine point six percent return on equity in 2015 they would bounce around till 2017 and they're gonna peek up the return on equity at thirty four point eight percent that's that's a really good return on equity my most humble of opinions however for the next two years they're sliding their return in equity it's going from thirty four percent to twenty five percent to twenty three percent usually when that happens the company is paying off debt now on the surface that sounds fantastic you pay off debt for a company you're gonna be reducing their leverage and you're also gonna be reducing their risk the more the less that a company has the less risk the less risk the more chant the better the chance they're going to be solvent in this short to moderate term however this organization they are not taking advantage of long term opportunities for um tax benefits when you take on debt so if you take on debt a they're gonna be paying historically low interest rates right now I mean the rates are bottomed out so I mean if you can take on debt now is the time to do it be if they're not taking on debt kind of tells us they really don't have that much in the you know down the pipe that are going to be generating more revenues for them because if they do how are they going to fund that if they're gonna fund it through equity well I mean they you only have so much equity you know you if they tap into the debt they're gonna be able to fund it and they're gonna be making money off a borrowed money they're not seeing that or they're not doing that or they don't have any long-term activities that are going to you know while the investors are well customers so from an investor's perspective I'd be a little bit concerned that they're not taking on debt at this point in time they're really dropping their debt position through the floor and so that kind of tells me is they they have very little you know expectations for above average revenue girl so hopefully this information is helpful and if you all want to go ahead and get some more information on the thoughts and ideas on analysis for us Southwest Airlines um please go ahead and mosey on over to my website which is quality business plan comm four slash Southwest air financial statements and financial ratios on this website and these prices do change depending on the year um so on this website you're gonna be able to pick up at the end reports I do go and I research the annual reports I'm for five years for Southwest air so you can purchase those or you can purchase my financial report and I do update that periodically I'm so if it's not available um it's being updated and it will be available within 24 hours but it that's right now it's $9.99 but that price does change so hopefully this informations hopefully y'all enjoyed the video and you learn something about South Luntz errors and how to do the analysis if you need some more information check out my site and have a fantastic day thank you