Southwest Airlines Company (LUV)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 3.47 | 3.31 | 3.49 | 3.90 | 2.63 |
The solvency ratios of Southwest Airlines Co, as indicated by the debt-to-assets, debt-to-capital, debt-to-equity, and financial leverage ratios, show a trend of fluctuation over the past five years.
The debt-to-assets ratio, which measures the proportion of total assets financed by debt, has decreased from 0.30 in 2021 to 0.22 in 2023, indicating a stronger ability to cover assets with equity rather than debt.
Similarly, the debt-to-capital ratio, calculated as the percentage of capital structure funded by debt, has shown consistency at around 0.43 over the past three years, reflecting a balanced mix of debt and equity financing.
The debt-to-equity ratio, representing the extent of leverage carried by the company, has exhibited a significant increase in 2021, reaching 1.03, but has since improved to 0.76 in 2023, indicating a reduction in reliance on debt for financing.
The financial leverage ratio, which measures the level of debt in relation to equity, has fluctuated over the period, with higher values in 2020 and 2021 but has reduced to 3.47 in 2023, suggesting a moderation in financial risk.
Overall, the trends in Southwest Airlines Co's solvency ratios indicate a relatively stable financial position, with a decreasing reliance on debt financing in recent years, enhancing the company's ability to meet its financial obligations and weather potential economic challenges.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 0.93 | 3.22 | 3.82 | -11.36 | 26.06 |
The interest coverage ratio for Southwest Airlines Co has shown significant fluctuations over the past five years. In 2023, the interest coverage was not provided, making it difficult to assess the current financial health in terms of interest payment obligations.
In 2022, Southwest Airlines Co had an interest coverage ratio of 12.11, indicating that the company generated sufficient operating income to cover its interest expenses more than twelve times over. This suggests a healthy financial position in terms of servicing its debt obligations.
However, in 2021, the interest coverage ratio dropped to -2.96, indicating that the company's operating income was insufficient to cover its interest expenses, potentially raising concerns about its ability to meet debt obligations through operational income alone.
The most significant decline was observed in 2020, with the interest coverage ratio plummeting to -16.96. This sharp decrease signifies a critical financial situation where the company's operating income was insufficient to cover its interest expenses by a substantial margin.
Unfortunately, information for 2019 is not available, limiting the ability to track and analyze historical trends effectively. In conclusion, the interest coverage ratio of Southwest Airlines Co has exhibited volatility, highlighting the importance of monitoring financial performance metrics to assess the company's ability to meet its debt obligations.