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Module 2: Delta Airlines

Module 2: Delta Airlines. Net Enterprise Assets Net Financial Liabilities Enterprise Profit After Tax Financial Expense After Tax Laura Conti. Enterprise Operations vs. financing activities. Enterprise operations Business/production activities undertaken by the company

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Module 2: Delta Airlines

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  1. Module 2: Delta Airlines

    Net Enterprise Assets Net Financial Liabilities Enterprise Profit After Tax Financial Expense After Tax Laura Conti
  2. Enterprise Operations vs. financing activities Enterprise operations Business/production activities undertaken by the company Financing activities Borrowing/lending activities undertaken by the company Need to separate the items on the balance sheet and income statement into these two categories
  3. Net enterprise Assets (NeA) and Net Financial Liabilities (NFL) To determine NEA and NFL, walk through balance sheet items and decide which items are related to the operations and which items are related to financing
  4. Split > NEA
  5. NEA
  6. Split > NFL
  7. NFL
  8. CSE
  9. Checking the numbers NEA=$8,017 NFL=$10,148 CSE=$2,131 CSE=NEA-NFL 2131=10148-8017 $2,131=$2,131
  10. Enterprise profit after tax (EPAT) and financing expense after tax (FEAT) To determine EPAT and FEAT, walk through income statement items and decide which items are related to the operations and which items are related to financing
  11. EPAT
  12. EPAT
  13. EPAT
  14. FEAT
  15. Interest tax benefit allocated to financing activities was computed by taking the interest expense and multiplying times the federal plus state tax rate (38.3%, 38.4%,37.2%)
  16. Checking the numbers EPAT=10 FEAT=(812) CI=(802) CI=EPAT-FEAT (802)=10-812 (802)=(802)
  17. Line items that need to be further analyzed Other accrued liabilities All operating? Pension, postretirement related benefits All operating? Noncurrent liabilities All operating? Restricted cash, cash equivalents and investments Which portion is due to investments? Should cash and cash equivalent part be included in operations? Fuel card obligation After further review, the notes revealed that this was just a credit card debt owed to American Express Gain on derivatives Is it more than just hedging for fuel risk?
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