What Is Southwest's Current Ratio?

Each year, 8% of Southwest’s revenues has been spent on advertising. Southwest is increasing their advertising costs since the amount has increased from 4% in 2014 to 6% in 2015. In 2016, total operating expenses made up 82% of net sales which is to be expected since most the company’s expenses include operating expenses.
In 2016, the balance sheet showed that 37% of the total assets were current assets. Inventories of parts and supplies made up 7%, and short term investments made up 36% of total assets. Southwest’s accounts payable were equal to 14% in 2016, however this number has been decreasing. Long-term debt has decreased since 2015 from 9% to 7% in 2016.
Southwest’s current ratio is .7, which means that the company may have critical difficulty meeting its current obligations. This suggests that Southwest does not have good financial health. During the past thirteen years, Southwest’s highest current ratio was 1.73 while their lowest was .54. Southwest’s quick ratio is .64 which indicates that the company cannot fully pay back its current liabilities. Over the past thirteen years, Southwest’s highest quick ratio was 1.68 while their lowest was .50 (GuruFocus).

Southwest’s long-term debt and capital lease obligation for the quarter that ended in December 2017 was $3,320 million. Their total equity for the quarter that ended in December 2017 was $10,430 million and their debt to equity for the quarter that ended in December 2017 was 0.35. A high debt to equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings because of the additional interest expense. During the past 13 years, the highest debt-to-equity ratio of Southwest was 0.74. The lowest was 0.26.