Running head: FINANCIAL ANALYSIS AND PROPOSAL COMPONENT 3 1 FINANCIAL ANALYSIS AND PROPOSAL COMPONENT 3 6 Financial Analysis and Proposal Component 3 Mariea Pack-Elder Fin-650 Financial Analysis and Proposal Component 3 Hardy & Matson (2004) argue that the management of a company must continually evaluate the financial status of their firm to evaluate whether the firm will be able to meet is future obligations. Managers must always ensure a balance between their firm’s operations, marketing and financial status. A deficit in any of the three departments leads to an imbalance, which is detrimental to the firm. The aim of this article is to analyze and compare the future financial health of the Southwest Airlines and JetBlue Airlines based on the 9-step assessment process. The assignment will however focus on step 5: External Financing Need, Step 6: Target Sources of Finance and Step 7: Viability of 3-5 Years Plan. Striking a balance is important in ensuring long-term success, which is in line with the firm’s long-term goals, and strategies .Investors and other stakeholders look at the long-term health of an enterprise when making their decisions such as extending credit to the company, long-term supplier arrangements or investing in the enterprise’s equity. Some companies have in the past initiated very ambitious programs only to later discover they cannot finance such programs. The companies had to abandon the programs, which resulted in waste of resources (Hardy & Matson, 2004). Step 5 -future external financing needs The need for external financing in a company depends on the company’s future sales growth, future profitability, profit retention, and its cash cycle. Companies with a long cash cycle, low profitability, and low retention are particularly strong candidates for external long term financing (Hardy & Matson, 2004). Southwest Airlines has a strong ability to generate cash flows consistently. This has helped the company reduce its debt significantly over the last few years. In the 2015 financial year, the company generated $3.2 billion cash flow from operations and another $1.1 billion in free cash flows. The company ended the year with $3.1 billion in cash in its financial statement. However, this is set to change as the company plans to embark on a rapid expansion program, which includes expanding its capacity of its US routes, as well as commence international flights. This means the company will have to build a new international terminal, acquire new airplanes, hire more staff, as well as invest in parking spots in its new routes. This also means the company total assets will grow significantly in the next 3-5 years. Though the company might be able to finance its activities out of its operating income, in the near future it may be forced to seek long-term debts to acquire new aircrafts to use in the international routes. Currently, the comp ...

1. Running head: FINANCIAL ANALYSIS AND PROPOSAL
COMPONENT 3 1
FINANCIAL ANALYSIS AND PROPOSAL COMPONENT 3
6
Financial Analysis and Proposal Component 3
Mariea Pack-Elder
Fin-650
Financial Analysis and Proposal Component 3
Hardy & Matson (2004) argue that the management of a
company must continually evaluate the financial status of their
firm to evaluate whether the firm will be able to meet is future
obligations. Managers must always ensure a balance between
their firm’s operations, marketing and financial status. A deficit
in any of the three departments leads to an imbalance, which is

2. detrimental to the firm. The aim of this article is to analyze and
compare the future financial health of the Southwest Airlines
and JetBlue Airlines based on the 9-step assessment process.
The assignment will however focus on step 5: External
Financing Need, Step 6: Target Sources of Finance and Step 7:
Viability of 3-5 Years Plan. Striking a balance is important in
ensuring long-term success, which is in line with the firm’s
long-term goals, and strategies .Investors and other stakeholders
look at the long-term health of an enterprise when making their
decisions such as extending credit to the company, long-term
supplier arrangements or investing in the enterprise’s equity.
Some companies have in the past initiated very ambitious
programs only to later discover they cannot finance such
programs. The companies had to abandon the programs, which
resulted in waste of resources (Hardy & Matson, 2004).
Step 5 -future external financing needs
The need for external financing in a company depends on the
company’s future sales growth, future profitability, profit
retention, and its cash cycle. Companies with a long cash cycle,
low profitability, and low retention are particularly strong
candidates for external long term financing (Hardy & Matson,
2004). Southwest Airlines has a strong ability to generate cash
flows consistently. This has helped the company reduce its debt
significantly over the last few years. In the 2015 financial year,
the company generated $3.2 billion cash flow from operations
and another $1.1 billion in free cash flows. The company ended
the year with $3.1 billion in cash in its financial statement.
However, this is set to change as the company plans to embark
on a rapid expansion program, which includes expanding its
capacity of its US routes, as well as commence international
flights. This means the company will have to build a new
international terminal, acquire new airplanes, hire more staff, as
well as invest in parking spots in its new routes. This also
means the company total assets will grow significantly in the
next 3-5 years. Though the company might be able to finance its
activities out of its operating income, in the near future it may

3. be forced to seek long-term debts to acquire new aircrafts to use
in the international routes. Currently, the company is
constructing a $156 million, 5-gate concourse in Houston and
another in Fort Lauderdale terminal at a cost of $295 million
(Jeff, 2015). Overall, the company will need close to $ 2 billion
to finance its international expansion program over the next 3-5
years.
JetBlue Airlines on the other hand is looking to increase its
revenue and margins by increasing capacity in its existing
aircrafts and leveraging on its existing products. The new
initiatives are estimated to contribute $450 million annually in
the next 3-5 years. Addition of extra seats estimated to generate
an incremental $100 million in the 2017 financial year. The
company’s operating margin grew by 10.7 in 2015. However,
the company has had to delay its plan to deliver 18 Airbus
narrow bodies, which should have commenced in 2016 through
to 2023. This has helped the company reduce capital
expenditure by $900 million through 2017. Due to the deferral,
the company is targeting to offer a return on invested capital of
10% or more in 2017, which is a steady growth from a low of
5.3% in 2014. As such, JetBlue Airlines does not have a huge
need for external financing as it can finance the expansion
through its operating income (Mary, 2016).
Step 6 - Target Sources of Finance
Southwest Airlines has a low debt-equity ratio of 1.6. This
means that Southwest Airlines can readily access long-term
debt. The company has a good reputation in paying its
suppliers. In fact, over the last few years the company has been
reducing its proportion of debt financing buoyed by its good
performance. Southwest airlines made $561 million debt
repayments in 2014 and $184 million in 2015. The company has
debt repayment of $300 million annually. I think the company
can add around 450 million annual debt repayments without
compromising its debt-equity policy. As such, the company can
borrow in excess of $1 billion repayable in 25 years to finance
its expansion in addition to using retained income. In addition

4. to seeking low priced long-term debts stretching over 20 years,
the airline can also enter into a leasing agreement with aircraft
manufacturers rather than purchasing the aircrafts. Having made
lease payments of $50 million in 2015, I think the company can
add around $20 million annually in lease payments, which
would be financed by increased revenues from international
flights (Jeff, 2015).
On the other hand, JetBlue Airlines made debt and lease
repayments of $216 million in 2015. After deferring acquisition
of new aircrafts, the company is not under any pressure to take
up additional long-term financing. In fact, the company seeks to
take advantage of decline in fuel prices to make opportunistic
debt prepayments. The company had projected a capital
expenditure of $820 million to $870 million for 2015 (Karen,
2013). Due to the deferral, the capital expenditure is set to
remain more or less the same for the next few years, which
mean the company can finance its expansion program, and still
manage to pay maturing debts out of its operating income. As
such, there is no need to take up more debt from external
sources.
Step 7 – Viability of the Three to Five Year Plan
Step seven of assessing an enterprise’s future financial health
involves assessing whether the enterprises debt-equity mix is in
line with the enterprises debt policy (Hardy & Matson, 2004).
Southwest Airlines has one of the low debt-equity ratios of 1.6
in the aviation industry. As such, adding more debt to finance
its international expansion strategies will still be in line with its
debt policy. As such, the company can see of its capital
expenditure projects without worrying about its debt-equity mix
getting out of proportion (Jeff, 2015).
JetBlue’s aircraft deferral will help the company meet its goals.
However, without the deferrals, the company would have found
it hard to meet all its goals due to lack of enough finances
forcing it to look for external financing. With the deferrals, the
company will generate positive cash flows after posting
negative cash flows in 2014 and barely managing positive cash

5. flows in 2015 (Karen, 2013). With the deferral, the new
investments, product strategy, and strategic goals are in line
with the company’s financing capability and its debt-equity
policy. However, had the company followed through with the
acquisition of the 18 aircrafts, the company would have been
forced to increase its debt ratio to finance all its projects. This
would have put the company’s debt-equity mix out of line with
its debt policy JetBlue’s non-aircraft expenditure should fall to
around $150 million in 2016. In addition, the company would
have found it hard repaying its additional debt given the fact
that it expects its current debt maturities to increase in the next
five years with 2016 set to post a high of $455 million. The
company decided to work on reducing its level of encumbered
assets to provide flexibility in managing its capital requirements
and cost of debt. In 2015, long-term debt and capital leases
weighted average interest rate stood at 4.6%. Due to their low
debts, the two companies can weather any unsteady passenger
volumes and increase in fuel prices in the next 3-5 years, as
they will not have to struggle to borrow externally to pay
maturing debts (Mary, 2016).
References
Hardy, M., & Matson, B. (2004). Data driven investing.
Newbury Port, Mass: Data Driven Pub.Jeff, T. (2015, June 11).
How Southwest's FP&A Team Helps The Airline's Strategy
Take Off.
Retrieved from
http://www.forbes.com/sites/jeffthomson/2015/06/11/how-
southwests-fpa-team-helps-the-airlines-strategy-take-
off/#74b308c5280d
Karen, J (2013, 26 March). Analysis: JetBlue looks to stand out
in industry's middle seat.http://www.reuters.com/article/us-
jetblue-outlook-idUSBRE92P0DY20130326Mary, S. (2016,
June 10). JetBlue Trims Growth Plans on Revenue Woes and
Rising Fuel Costs. Retrieved from
http://www.bloomberg.com/news/articles/2016-06-10/jetblue-
trims-growth-forecast-as-unit-revenue-outlook-weakens

6. Intrinsic Value of a Firm
Instructions:
1. Use the table below to provide your final valuation numbers
for the Intrinsic Value of a Firm assignment in Topic 8. (Attach
your calculations you completed to arrive at your valuation to
the end of this document before submission).
Intrinsic Value using Equity Valuation Model
Intrinsic Value using FCF Valuation Model
2. Provide your rationale for your choice of equity valuation
model:
© 2016. Grand Canyon University. All Rights Reserved.

7. RUNNING HEAD: FINANCIAL ANALYSIS
1
FINANCIAL ANALYSIS
6
Financial Analysis of Nike, Inc.
Mariea Pack-Elder
Grand Canyon University: FIN-504
June 27, 2016
Financial Analysis of Nike, Inc.
Financial analysis of a company is the assessment of the ability
of a company to be profitable and stable in the business venture
that the company decides to carry out(Gowthorpe, 2008). There
are many factors that financial analysts consider when they are
doing financial analysis of a company.Some of the
considerations are made in the investments that a company
makes on the assets and economic performance of such a
company. The discussion below will look at the financial
analysis of Nike, Inc. taking at the two factors mention above
and comparing it with the financial analysis of its closes
competitor Adidas.
Nike as an athletic sportswear and apparel producing company
has so many assets. Some of the assets that Nike have include
various plants, equipment and property that they have acquired
in different countries all over the world. Another type of asset
that Nike, Inc. is cash and equivalent of cash. Others assets are
inventories, short-term investments, goodwill and accounts
receivable. Using the financial report of 2014 the total assets of
the company was valued at $4.1B(Martins, 2015).
From the value of assets as at 2014 will be used to calculate
Asset Turnover Ratio. This is one of the methods that can be
used by a company to know whether they can generate sales
from the assets that they have. The ratio show how a company
can efficiently generates sales from the assets. The formula for
calculating the Asset Turnover Ratio is by getting a division of

8. the net sales by total value of the assets.
Asset Turnover Ratio = Net Sales
Value of total sales
= $20.4B
$4.1B
= 4.97
This from the calculations is for every dollar of the assets, the
company is able to generate 49.7 cents of the sales. If the Asset
Turnover Ratio of Adidas of the same year that is 2014 was
2.82. This means that the viability of Nike Companyin the
market is far much better compared to its competitor Adidas.
Therefore, there is probability of the Nike making profits using
the assets that it has is much higher compared to other
companies in the same category.
The economic performance of Nike if we evaluate it using the
2015 financial reports can be said to be good. This is because
the 2015 ended with a rise in its revenues with about 10% from
the previous year. The revenue increased from $27,852 million
to $30,411 million. The rise can be attributed to the increase in
the sales in its major market that is the United State. The
increase makes it the largest control of the market at
approximately 30% of the market. Thus, the company is still
capable of making profits(Workuch, 2015).
Nike also is currently is using some of the best strategies to
ensure they minimize on the costs while maximizing on the
profits. Nike uses a strategy of not producing or manufacturing
its products but designs the products then give the designs to be
made by independent companies to produce them and then
market and sell the products. Nike also use some of the famous
players in different sports to endorse their products to help
increase the consumer preference. Nike also ensure that their

9. products are produced outside United States, since the cost of
production there is much higher compared to the rest of the
countries(Delavose, 2013).
This strategy differs from that of its competitor Adidas. Adidas
has manufacturing companies that it owns, which helps them in
production of their designed products. Thus their cost of
production is much higher compared to that of Nike, this then in
return make Nike a more stable and viable business entity
compared to Adidas its competitor.
Financial Projection for Nike in the next five years
May 2016
May 2017
May 2018
May 2019
May 2020
Short-term investments
2,072
2,922
2,668
1,440
2,583
Cash and Equivalents
3,852
2,220
3,337
2,317
1,995
Inventory
4,337
3,947
3,434
3,350
2,715
Income taxes

10. 389
355
308
274
312
Accounts receivable
3,358
3,434
3,117
3,280
3,138
Property and equipment
3,011
2,834
2,452
2,279
2,115
Good will
131
131
131
201
205
Prepaid expenses
1,968
818
802
870
594
Intangible assets
281
282
382
535
487
Other Assets

11. 2,201
1,651
993
919
894
Total
21,600
18,594
17,584
15,468
14,998
From the projection of the table, the profitability ratio of each
year can be known when calculated. For example the
calculations for the ratio of Return on Assets (ROA)
ROA = 100× Net Income÷ Total Assets
= 100×20.87÷14.32
= 145.74
From the calculations on the ratio of Return on Assets, we can
say that the profitability of Nike as a company is very high and
very good compared to the competitors.
In conclusion, financial analysis is very important for a
company as it helps make the company realize whether the
venture it is likely to get into is one that can bring in profits
which is the aim and goal of every business entity. For Nike as
a company, the financial analysis that has been done show that
it is a stable and viable business, which can make profits as the
goals of the company.
References
Delavose, C. (2013). Nike, inc. Ontario: Book On Demand Ltd.
Gowthorpe, C. (2008). Financial analysis. Oxford: CIMA.

12. Martins, J. (2015). Dynamic Financial Ratio Analysis.
SpringerReference, 16-25.
Workuch, R. (2015). Nike, Inc. Encyclopedia of Business Ethics
and Society, 12-18.
1
2
Running Head: Apple vs Samsung
Mariea Pack-Elder
Fin-650
June 15, 2016
Analysis of the Fundamentals
Instructions:
1. Using the most recent U.S. Securities and Exchange
Commission (SEC) 10-K reports for your company and chosen
competitor, provide a brief yet succinct comparative analysis as
below:
Criterion
Selected Company(Apple)
Chosen Competitor Company(Samsung)
Business overall
Apple inc. designs and market electronics which include mobile,
media devices, personal computers and also sell related
software and services. It offers iphone, a line of smart phones;
iPad, a line of multi-purpose tablets; and Mac, a line of desktop
and portable personal computers.

13. Samsung is multinational company that provides a wide
range of electronic products and IT solutions. It offers Tablets,
cell phones, smart phones, TVs Memory and storage devices
and home appliances like refrigerator, Microwave and
Dishwasher etc. Samsung also offer accessories which include
like headphones book covers wireless keyboard and adapters.
Products & services
It offers iphone, a line of smart phones; iPad, a line of multi-
purpose tablets; and Mac, a line of desktop and portable
personal computers.
It offers Tablets, cell phones, smart phones, TVs Memory and
storage devices and home appliances like refrigerator,
Microwave and Dishwasher etc.
Customers
Youngsters and Rich people
Middle class people ranging from 18 to 60
Goals
Apple ‘s Goal is to obtain stellar products and services within
tight timeframes, at a cost that represents the best possible
value for customer .Creative and Innovative products to update
living style. Apple empowers today’s modern workforce
to do something really amazing
To obtain 400billion USD in sales and to see the company in top
1 in global IT industry and Global also in Top 5.
Strategies

14. Apple's strategy was to create and offer fresh and brand new
products resulted from mixed workmanship and innovation
keeping in mind the end goal to give a straightforward and
streamlined client encounter. This business strategy helped
Apple to be in front line of cell phones making company.
Samsung’s marketplace strategy, is to occupy the market with
different new products in a short period of time. Samsung
appeals to public by providing great variety of gadgets such as
cell phones, smart phones, tablets, etc. to both low and high-end
markets meaning at least one of their products will attract a
common man.
Market Positions
According to latest survey conducted in Dec 2015 Apple is
occupying 13.9% of market share.
According to latest survey conducted in Dec 2015 Samsung is
occupying 21.4% market share.
General risk factors
Rapid Technology change in global markets.
Competitiveness and Stimulating customer demand
Inventory and other asset risks
Quality issues
Internal and external risks
Environmental issues
Brain drain risks
Downward pressure in stock market
Quantitative and qualitative mark risk factors
Quantitative Risk
Price comparison
Market share
Qualitative Risk
Quality impairment
Rapid technology risk
Quantitative Risk
Smart Phone sale
Revenue lagging

15. Qualitative Risk
In sufficient security
Hacking risk
Apps development risk
Competitors
Samsung
Black berry
Sony
Palm
Apple
Sony
Panasonic
LG
Competitive technology
IOS
ITunes
Music Collections
Android
Chip making technology
Regulatory considerations
Hardware warranties
Consumer rights
Software licensing agreements
Ethical restrictions
Hardware and software rights
Other business issues
Operating characteristics
Innovative
Luxurious
Elite class target
Smart technology
I phone
OS X
· Smart phone launching

16. · Tizen OS
· Galaxy models
· Long Battery
· Fast charging
2. Provide your rationale for your choice of equity valuation
model:
Brand value portrays partner reaction as an increment in
clients, incomes, and edges than would some way or another be
conceivable without promoting backing to assemble
mindfulness. In this research I concluded that still apple is
number one and investing in Apple Inc is rational decision
because its stock value is appreciating day by day due to its
innovative products and heavy sales.
© 2016. Grand Canyon University. All Rights Reserved.
© 2016. Grand Canyon University. All Rights Reserved.