Question

WestJet Airlines Ltd. was founded in 1996 by a team of Calgary entrepreneurs and, as of December 31, 2012, has grown from serving five western Canadian destinations with three aircraft to servingWestJet Airlines Ltd. was founded in 1996 by a team of Calgary entrepreneurs and, as of December 31, 2012, has grown from serving five western Canadian destinations with three aircraft to serving 81 destinations in North America, Central America, and the Caribbean with 100 aircraft. WestJet’s financial statements for 2012 and 2011 and excerpts from selected notes to its financial statements are shown below:
Required:
1. Examine WestJet’s statements of financial position. The company’s assets increased in 2012. Which asset shows the largest increase?
2. WestJet’s current liabilities include the advance ticket sales account with a balance of $ 480,947. What does this account represent, and what type of transactions would cause an increase or a decrease in the account balance? Explain.
3. Compute the total asset turnover ratio, return on assets, return on equity, and net profit margin ratio for both 2011 and 2012. Comment on the profitability of WestJet’s operations in both years. WestJet’s total assets and shareholders’ equity at December 31, 2010, amounted to $ 3,383,980 and $ 1,304,233, respectively.
4. WestJet’s operations generated significant amounts of cash during both 2011 and 2012. The company also made significant investments in new aircraft in 2012. How did the company finance the acquisition of additional aircraft?
5. Compute and interpret the quality of earnings ratio and the capital expenditures ratio for both 2011 and 2012. (Note: Include property and equipment and intangible assets in your computation of the ratio.)
6. Access one of the online information services listed in the chapter, search for WestJet Airlines Ltd. (WJA. TO), and look for earnings estimates. What is the average analysts’ estimate of WestJet’s earnings per share (EPS) for the next two fiscal years? Do analysts expect WestJet’s EPS to increase or decrease in the future? What information did the analysts take into consideration in computing their EPS estimates for the next two years?


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  • CreatedAugust 04, 2015
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