Critical Analysis of Delta Airline

Critical Analysis of Delta strip Lines, Inc. fiscal Reporting and divine revelation T up to(p) of Contents Description of Delta credit line Lines, Inc. accent, Industry, Market3 fiscal Reporting Similarities and Differences4-5 Direction of manifestation Three Year Comparison5-6 manifestation Techniques7-8 mo force outary Derivatives8-9 mo bring inary arguing Analysis Three Year dimension Analysis10-13 disclosure of visor Items Application of GAAP13-18 Conclusion Closing Comments18-19 Description of Delta airwave Lines, Inc. Background and ProductsDelta wrinkle Lines, Inc. was origin wholey formed as Huff Daland Dusters, Inc. on whitethorn 30, 1924, in Macon, Georgia. This began as an aerial crop dusting ope balancen until the comp whatever travel to Ouachita Parish in northeastern Louisiana, in 1925, and began acting as a rider flight path in late 1929. Collett E. Woolman purchased the family on September 13, 1928, and renamed it Delta send off Service, with head quarters in Monroe. In the ensuing decades, Delta grew by dint of the addition of routes and the attainment of an new(prenominal)(prenominal) airlines.It transiti cardinald from propeller planes to jets in the 1970s, and entered international competition to Europe in the 1970s and across the Pacific in the 1980s. Delta channel Lines, Inc. is contemporaryly a major airline establish in the united States headquartered in Atlpismirea. Delta is the worlds largest airline operational(a) below a single certificate, operating flights on six continents across the globe. Delta ope accounts an extensive domestic and international network, spanning North America, South America, Europe, Asia, Africa, the philia East, the Caribbean and Australia.Delta and its subsidiary Delta Connection operate everyplace 4,000 flights every day. Delta and the Delta Connection carriers navigate to 348 destinations in 64 countries. Industry and Market Typic eithery, airline companies and aircraft manuf acturers be to a greater extent prone to swings in revenue and law market prices ascribable to the stretch out of economic indicators. Delta had an increase of 38% in domestic revenue since 2008. This is callable to increase cargo and baggage handling fees collectible to new policy implementation. Delta increase its international revenue by 26% since 2008.This is close toly due to an increased focus in the international bena due to the demoralize demand and higher competition from discount airliners in the U. S. The airline intentness contains a variety of dissentent airlines. rough of Deltas biggest competitors atomic number 18 communicateTran Holdings, southwestern walk everywherelines Comp some(prenominal), Continental strainlines, Ameri female genital organ airlines, JetBlue channelways, United Airlines, and US Airway Group. All of these competitors are diversified in hurt of the flake of different things they offer, freeing companies in the sedulousness to take over access to a number of different profitable markets.Similarities and Differences in pecuniary Reporting Comparison of Annual Report, 10K and 10Q Delta Air Lines, Inc. riding habits a number of different elements to supply pertinent breeding to consumers, investors, creditors, employees, and any(prenominal)one with a general pertain in or curiosity somewhat the telephoner. This pertinent education comes in the form of extends that companies file with the Security and Ex transmute Commission or SEC, such(prenominal) as the order stratumbook report, the 10K and the 10Q.The twelvemonthly report is a nationwide report on a troupes activities without the front year. Annual reports are intended to give appropriateholders and opposite enlivened persons randomness astir(predicate) the caller-ups activities and act. The 10K is a summary report of a alliances performance that must be submitted annually to the SEC. The 10Q, on the other hand, is a report of a ships ships gilds performance submitted quarterly by all public firms to the Securities and Exchange Commission. In the 10Q, firms are required to soften except newly relevant information egarding their pecuniary position. We see that all three reports are very similar in general as to the information they allow, as well as their purpose. on that point are a number of similarities and differences between the three reports. The annual report, foreign the 10K and the 10Q, is designed for the benefit of the acquitholders and any potential investors. The annual report is fixate once a year, like the 10K, and usually provides information over a two or three year flow to show harvest-tide or decline.The annual report is produced to be aesthetically appealing, with color, pictures, quality paper, and depression all for the benefit of pilot burner or potential shootholders. The annual report usually take ons a corporation overview, a letter to shareowners, information on the high society and its brands, products, and initiatives, its pecuniary highlights, a list of the members of the board of directors, goals and opportunities, and then any important pecuniary statements, information and nones, all of which is meant to promote investment and provide information.The 10K is in addition a form of an annual report simply is only filed with the SEC. It is merely a monetary snapshot of the companion over the preceding year and lacks any visually appealing elements. It too includes a company of the important financial statements, information and notes, but unlike the annual report, it gives practically more detail and insight into the ope proportionns and money feed in functions of the company. The 10K includes particular information regarding the business, risk factors, properties, legal proceedings, controls and procedures, transaction sexual congressships, and often times more.Like the annual report, the 10K provides information fo r the trustworthy year as well as for one or two years onwards the current. The 10K is not meant for the benefits of shareholders, but is produced for the sole use of being files with the SEC. The in conclusion report is the 10Q, which is a quarterly report filed alone with the SEC. This report gives a snapshot of the companys financial slur in the coating quarter, usually a three month period, and in like manner supplies the information for the alike(p) quarter in the previous year. The 10Q sually contains information for the essence year to date as well. The 10Q, unlike the 10K, is an unaudited version of the financial information and whitethorn contain a significant amount of estimation. The report contains sufficiently little(prenominal) information than the other two reports, and gives a general overview of the adjacent topics financial statements, ope dimensionns, quantitative and qualitative manifestations, controls, and risk factors. Like the 10K, the 10Q lacks any visually appealing elements be motive its sole use is for that of the SEC and not for the stockholders or potential investors.While still being of importance, the 10Q is of less important than that of the annual report or 10K because of its unaudited and estimated nature, as well as the fact that it reports on a significantly shorter time period than that of the reports and therefore enables users of the report to regurgitate a some(prenominal)er conclusions. Overall, the 10Q is not as useful as those interested in the financial information because it provides more less detail and gives a much smaller picture of the companys financial outlook. Direction of Disclosure Three Year ComparisonOver the last three years, Delta Air Lines, Inc. has made few changes in regard to its direction of disclosure. Delta Air Lines, Inc. discloses its mentions to Financial Statements directly hobby its Financial Statements and Supplementary Data. In 2008 and 2009, Delta Air Lines, Inc. disc losed all of the same eighteen notes to financial statements in the same order. In 2010, the number of notes was increased to nineteen. The three added notes in 2010 consist of advert 8 JFK Development, Note 11 unsuccessful person Claims Resolution, and Note 19 Subsequent Events.In the 2008 10K, Note 17 e e paygrade and Qualifying Accounts was stated and kept in the 2009 10K as Note 17 as well. However, it was not include in the 2010 10K. All the Notes added in individually year were due to issues that arose within the company. Delta Air Lines, Inc. Note 11 Bankruptcy Claims Resolution was added because In September2005, we and substantially all of our subsidiaries filed voluntary petitions for reorganization under Chapter11 of the U. S. Bankruptcy Code. On April30, 2007, the Delta Debtors emerged from bankruptcy.Under the Delta Debtors Joint Plan of Reorganization, most holders of allowed general, unsecured claims against the Delta Debtors received or lead receive Delta spec ial K stock in satisfaction of their claims. There willing be no except material impact to our fused Statements of Operations from the solution of claims because the holders of such claims will receive under Deltas and Northwests Plan of Reorganization, as the case may be, only their pro rata share of the distributions of common stock contemplated by the applicable Plan of Reorganization.Delta Air Lines, Inc. Note 8 JFK restoration states the companys annual rent, operation and maintenance payments for the use of oddment facilities at JFK were approximately $135million in 2010, and estimate the future(a) annual payments to be approximately $200 million after the puke is complete in 2016. We will be responsible for the management and social organisation of the lying-in and bear construction risk, including cost overruns. As construction progresses, the project will be infixed on our consolidate relaxation tack as a fixed summation as if we owned the asset.We will also record a related construction obligation on our consolidated equipoise Sheet. Future rental payments will surmount this construction obligation and result in the recording of interest get down on our amalgamated Statement of Operations. The last aspect of Delta Air Lines, Inc. direction of disclosure that has changed with the last three years is Note 19 Subsequent Events. In February 2011, the company completed a $100 million offering of bye-bye done Certificates and a $135 million offering of Pass Through Certificates through two offprint pass through trusts. This has a utmost matureness in January 2016.The company received $75 million in net proceeds from the 2010-2B EETC at the closing of the offering and the stay $59 million is being held in escrow until they refinance other aircraft. Techniques of Disclosure Companies should disclose information as completely as possible in relation to financial condition, contingencies, methods of valuing assets and liabilities, and co ntracts and agreements. In order to do so, a company may use a number of different disclosure proficiencys, which include but are not limited to, parenthetical explanations, notes, cross references and contra tems, and supporting schedules. Delta Air Lines, Inc. uses a number of these techniques in the disclosure of their pertinent financial information. Delta Air Lines, Inc. uses parenthetical explanations in a number of different places throughout their financial insurance coverage. Companies use parenthetical explanations to add clarity and completeness where it may be needed. This technique brings additional information into the body of the text or statement an afforded for less oversight by readers or users of the financial information. Delta Air Lines, Inc. uses parenthetical explanations in their financial reporting.For example, on the balance sheet under inventoryholders Equity, Delta Air Lines, Inc. shows parenthetical explanation of the price per share when stating Shar es of common stock issued and hire expense associated with truth awards (Treasury shares withheld for payment of revenue enhancementes, $10. 73 per share). (This example is in the 2010 annual report). Notes are another important technique that companies use for disclosure purposes. Notes allow companies to supply additional information or explanations without writing lengthy or inconvenient parenthetical explanations.Notes are commonly used to disclose the existence and amount of any dividends in arrears, terms of or obligations concerning purchase commitments, particular financial arrangements, financial instruments, depreciation policies, changes in bill principles or policies, and any contingencies. Companies who use notes are obligated to usher all essential facts as completely and precisely as possible in an childbed to relay race the appropriate and accurate information to readers. Delta Air Lines, Inc. relies heavily on notes in their financial reporting and disclose s them in a section called Notes to the consolidated Financial Statements.Each of these notes adds or clarifies information already presented in the report. An example of such is Note 4 Goodwill and Other Intangible Assets. This note in the Notes to Consolidated Financial Statements section of the annual report describes that the company experienced a significant decline in market capitalization in the first place from record high fuel prices and overall airline industry conditions. We primed(p) that these factors combine with further increases in fuel prices were an indicator that a saving grace mischief test was required.As a result, we estimated uncontaminating nurture based on a discounted projection of future coin flows, supported with a market-based valuation. We determined that grace was impaired and preserve a non- property broadcast of $6. 9billion for the year ended December31, 2008. This is just one of many another(prenominal) notes disclosed by Delta Air Line s, Inc. in their financial reports (this example is in the 2010 annual report). Cross-references and contra items are another important techniques used to supplement the disclosure of financial information. Cross-referencing shows a direct relationship between an asset and a li major power on the balance sheet.Cross-referencing is not a technique used by Delta Air Lines, Inc. in their disclosure. Along with cross-referencing, Delta Air Lines, Inc. does not disclose any contra or adjunct accounts in its financial reports. Delta Air Lines, Inc. reports its assets at net and does not quantitatively divulge any contra account information. Contra and adjunct accounts are listed on the balance sheet. Contra accounts either reduce an asset, li magnate, or owners equity account. Adjunct accounts increase an asset, indebtedness, or owners equity account. Some examples of such accounts are accumulated depreciation and discount or insurance premium on bonds payable.Delta Air Lines, Inc. does not list any of these accounts unique(predicate)ally in disclosing their financial information, but instead lists all their assets and liabilities at net. The last technique of disclosure to discuss is supporting schedules. Supporting schedules are used to present more detailed information about certain assets or liabilities. Typically, Delta Air Lines, Inc. does not use this technique in disclosure. Financial Derivatives Financial differential coefficient instruments are products developed to manage the financial risks associated with constant change due to volatile markets, new technology, and deregulation.Derivative instruments help to smooth out fluctuations caused by confused types of risk. Companies, such as Delta Air Lines, Inc. use the fair treasures or cash flows of derivative instruments to offset changes in fair values or cash flows of any at-risk assets. Delta Air Lines, Inc. discloses information on their use of financial derivative products in their Notes under Con solidated Financial Statements. In Note 1 Background and Summary of Significant Policies, Delta Air Lines, Inc. discusses a change in accounting policy in regards to derivative instruments.In March of 2008, FASB issued Disclosure about Derivative Instruments and Hedging Activities. The standard requires enhanced disclosure about how and why entities use derivative instruments, how the instruments and related hedging items are accounted for and how the instruments arrogate an entitys financial position, performance, and cash flows. This standard amends required disclosures about the fair value of financial instruments in interim and annual financial statements. In Note 3 Risk Management and Financial Instruments, Delta Air Lines, Inc. discuss their disclosure of financial derivatives and how they are accounted for.Delta Air Lines, Inc. results of operations are materially impacted by changes in aircraft fuel prices. In an effort to manage motion picture to this risk, the company pe riodically enters into derivative instruments broadly comprised of rock oil oil, heating oil and jet fuel swap, collar and call filling contracts to hedge a portion of our projected aircraft fuel requirements, including those of our Contract Carriers under capacity purchase agreements. All hedges are enter at fair value, and gains and tone endinges on hedges are recorded in other income (expense) at net.Within the Consolidated Statement of Cash Flows, settlements for fair value and cash flow hedges are classified as an operating activity, while all other derivatives are classified as a financing activity. Financial Statement Analysis Analysis Three Year balance Comparison 2010 2009 2008 fluidness proportions Current Ratio 0. 64 0. 79 0. 81 current assets / current liabilities Quick or Acid Test Ratio 0. 61 0. 76 0. 77 current assets inventories / current liabilities Current Cash Debt Coverage Ratio N/A 0. 14 -0. 15 net cash from operating activities / honest cu rrent liabilities Activity Ratios Receivables overturn Ratio 21. 81 20. 74 15. 73 net sales / second-rate (net) trade receivables Inventory Turnover Ratio N/A N/A N/A cost of goods sold / average inventory Asset Turnover Ratio 0. 74 0. 64 0. 50 net sales / average core assets Profitability Ratios Profit Margin on Sales 0. 02% -0. 04% -0. 39% net income / net sales Rate of Return on Assets 0. 01% -0. 03% -0. 20% net income / average add up assets Rate of Return on Common Stock Equity 0. 73% 0. 31% 1. 5% net income preferred dividends / average common stockholders equity wampum Per Share $0. 71 -$1. 50 -$19. 06 net income preferred dividends / leaden shares outstanding diluted Earnings Per Share $0. 70 -$1. 50 -$19. 08 given in the financial statements Payout Ratio N/A N/A N/A cash dividends / net income Coverage Ratios Debt to Total Assets Ratio 33. 59% 38. 06% 35. 50% debt / hit assets Times Interest Earned -0. 61 1 . 74 13. 20 income before interest and taxes / interest expense Cash Debt Coverage Ratio N/A 0. 3 0. 04 net cash from operating activities / average sum up liabilities Book Value Per Share $1. 08 $0. 30 $1. 87 common stockholders equity / outstanding shares Explanation A financial synopsis of Delta Air Lines, Inc. is best done through the calculation and interpretation of financial ratios. There are four categories of financial ratios fluentity, activity, favorableness, and coverage. Each ratio gives a piece of information about the financial stability of the company and conjointly portrays the big picture in regards to finances.The first type of ratios, liquidity ratios, measures a companys short-run ability to pay its maturing obligations. The first ratio, the current ratio, is mainly used to give an idea of the companys ability to pay back its short-run debts with its short-term assets. The higher the current ratio, the more able-bodied the company is of paying i ts obligations. Delta Air Lines, Inc. current ratio has lessen stepwise in the past three current years, which means the company is go less capable of paying off their maturing obligations. In all three years Delta Air Lines, Inc. as remained with a current ratio under one. A ratio under one suggests that the company would be unable to pay off its obligations if they came due at that point. The next ratio, the riotous/acid test ratio indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. Like the current ratio, the higher the ratio, the unwrap the financial outlook of the company. Delta Air Lines, Inc. acid test ratio has continue to decrease over the last few years, which is an indication that the company is becoming less liquid. Once again, Delta Air Lines, Inc. atio remained under one, implying that the company is not capable of paying off its maturing debts at this current point in time. The last liquidity ratio i s the current cash debt coverage ratio which indicates whether a company can pay off its current liabilities from its operations in a given year. Delta Air Lines, Inc. current cash debt coverage ratio has increased from 2008 to 2009. The information needed to calculate 2010 was unavailable. The higher the current cash debt coverage ratio, the more capable the company is of paying off its current liabilities with the proceeds from its operations in a given year.Delta Air Lines, Inc. ratio was again below one in the two years calculated, consequence that the proceeds from their operations cannot support their current liabilities. The next type of financial ratios is the activity ratios, which measures how effectively the company is using the assets employed. The first ratio, the receivables turnover rate rate, measures the number of times on average a company collects receivables during the period. A low ratio implies that a company should re-assess its credit policies in order to ensure the timely collection of imparted credit that is not earning interest for the firm.Delta Air Lines, Inc. receivables turnover ratio increased over the last three years, meaning the company gradually started effectively using its employed assets. The inventory turnover ratio shows how many times a companys inventory is sold and replaced over a period. This ratio should be compared against industry averages. A low turnover implies poor sales or ineffective buying. This ratio could not be calculated for all three years because the company does not halt a cost of goods sold since they do not sell inventory.The last activity ratio, the asset turnover ratio, is useful to determine the amount of sales that are generated from apiece clam of assets. Companies with low profit margins devote a high asset turnover ratio, and those with high profit margins have a low asset turnover because of pricing strategies. Delta Air Lines, Inc. asset turnover ratio was increased over the last few years and was highest in 2010. This ratio indicates that over the last few years, the company has not been able to effectively use their assets to generate sales.A third type of financial ratios is the profitableness ratios that measure the degree of success and failure of a company during a given period of time. The profit margin on sales measures how much out of every dollar of sales a company usually keeps as meshing. Delta Air Lines, Inc. profit margin on sales had increased gradually over the last few years. While this is a verificatory indication, the company generally has a let down profit margin than other companies in its industry. The rate of chip in on assets shows how profitable a company uses its assets during a period of time. Delta Air Lines, Inc. as a low rate of return indicating an inefficient use of assets to generate earnings. This companys return on assets has increased over the last three years, indicating an increase in profitability. The rate of retu rn on common stockholders equity measures a companys profitability in terms of how much profit the company generates with the money shareholders have invested. Delta Air Lines, Inc. has a earlier low rate of return on equity and has not shown self-consistent growth over the last few years. This indicates less profit per dollar invests, as well as a decrease in company profitability.The next ratios are the basic earnings per share and the diluted earnings per share. Basic earnings per share are the portion of a companys profit allocated to each outstanding share of common stock. Diluted earnings per share expand on this idea by including any dilutive securities. Over the last three years, Delta Air Lines, Inc. basic and dilutive earnings per share have increased, indicating an increase in the companys profitability. The last profitability ratio is the payout ratio, which is the percentage of earnings paid out as dividends to common stockholders. Delta Air Lines, Inc. ayout ratio ca nnot be calculated due to the fact that this company has no cash dividends. The last type of ratios used for financial epitome is the coverage ratios. Coverage ratios measure the degree of protection for long-term creditors and investors. The debt to total assets ratio shows the proportion of a companys assets that are financed through debt. Companies with high debt to total asset ratios are said to be super leveraged, and would be in danger if creditors start to demand repayment of debt. Delta Air Lines, Inc. ratio is on the low side and has been consistently low over the last three years.This could be an indication that many of the companys assets are not financed through debt, which is good for the company. The times interest get ratio or TIE is used to measure a companys ability to spiel its debt obligation. It is usually quoted as a ratio and indicates how many times a company can cover its interest charges on a pretax basis. Failing to meet these obligations could force a company into bankruptcy. The next ratio, the cash debt coverage ratio, indicated a companys ability to repay its obligations from net cash provided by operating activities without having to liquidate the assets employed in its operations.Delta Air Lines, Inc. is very low which means that liquidation of assets would be required to repay current obligation. The last ratio we must consider is the book value per share. Book value per share is the amount each share would receive if the company were to liquidate in the basis of amounts report on the balance sheet. Delta Air Lines, Inc. book value per share has fluctuated significantly over the last few years but increased from 2009 to 2010, which is a good indication. Disclosure of Note Items Standard Applied and Application Delta Air Lines, Inc. ses Generally Accepted Accounting Principles (GAAP) for all of their financial reporting, disclosure, and statement analysis. Delta Air Lines, Inc. flies globosely after its merge North West. T he accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U. S. (GAAP). The companys Consolidated Financial Statements include the accounts of Delta Air Lines, Inc. and their wholly-owned subsidiaries. As a result of the Merger, the accounts of Northwest are include for all periods subsequent to the Closing Date.Preparation of these find financial statements require estimates and assumptions poignant the reported amounts of assets and liabilities at the date of the consolidated financial statements, reported amounts of revenues and expenses during the reporting period and related disclosures of contingent assets and liabilities. Item 1 Equity Disclosure of stockholders equity requires a company to disclose changes in the discern accounts comprising stockholders equity in order to make financial statements sufficiently informative.These changes may be disclosed in separate statements or in the basic finan cial statements or notes. In October2009, the Financial Accounting Standards Board issued Revenue Arrangements with Multiple Deliverables. The standard revises guidance on the determination of when individual deliverables may be treated as separate units of accounting and the allocation of consideration among separately identified deliverables. It also expands disclosure requirements regarding an entitys multiple element revenue arrangements. Item 2 DebtIn terms of long-term debt, disclosure generally must indicate the nature of the liabilities, matureness dates, interest rates, call provisions, conversion privileges, restrictions imposed by creditors, and assets designed or pledged as securities. It is recommended that companies show any assets pledged as a security for the debt in the assets section of the balance sheet. The fair values for all long-term debt should be disclosed if a practical estimation can be made. Lastly, it is required that companies disclose future payments for sinking fund requirements and maturity amounts of long-term debt during each of the next five years.This type of disclosure allows users of financial statements to evaluate amounts and time for future cash flows. Any off-balance sheet accounting that a company may do is required to be included in the notes in extensive detail. In Note 5, Delta Air Lines, Inc. acknowledges debt and gives specific details regarding its terms and conditions. For example, during 2010, the company recorded a $391million loss on extinguishment of debt, of which $304million related to a non-cash write-off of debt discounts that were recorded as part of purchase accounting.In the 2010 annual report, the company includes a table summarizing plan maturities of the companys debt, including current. The nature of this disclosure aligns with the GAAP requirements. Item 3 Income Taxes Delta Air Lines, Inc. accounts for deferred income taxes under the financial obligation method. They recognize deferred tax assets and liabilities based on the tax effects of temporary differences between the financial statement and tax bases of assets and liabilities, as measured by current enacted tax rates. A valuation allowance is recorded to reduce deferred tax assets when necessary.Deferred tax assets and liabilities are recorded net as current and noncurrent deferred income taxes on the Consolidated Balance Sheets. The income tax provisions are based on calculations and assumptions that are able to examination by the Internal Revenue Service (the IRS) and other onerous authorities. Although the positions they have interpreted on previously filed tax returns are reasonable, they have established tax and interest reserves in recognition that taxing authorities may challenge these positions, which could result in additional liabilities for taxes and interest.This company reviews and adjusts the reserves as quite a little warrant and events occur, such as pass of applicable statutes of limitation s, conclusion of tax audits, a change in exposure based on current calculations, identification of new issues, release of administrative guidance or the rendering of a court decision touch a particular issue. They adjust the income tax provision in the period in which the facts that give rise to the revision become known. Item 4 Earnings per ShareBasic earnings per share (EPS) are net income divided by the weighted average number of common shares outstanding during the period. Diluted EPS includes the additive shares assumed to be issued upon exercise of stock options and the incremental shares assumed to be issued under performance shares and curb stock unit arrangements. For the 2010, 2009, and 2008 EPS computations, 18 million, 26 million, and 12 million stock options were excluded from the calculation of weighted shares for diluted EPS because their affects were ant dilutive.Item 5 Accounts Receivables Accounts receivable primarily consist of amounts due from credit control panel companies from the sale of rider airline tickets, nodes of the company aircraft maintenance and cargo merchant marine services and other companies for the purchase of mileage credits under the companys SkyMiles Program. Delta Air Lines, Inc. provides an allowance for uncollectible accounts equal to the estimated losses anticipate to be incurred based on historical chargebacks, write-offs, bankruptcies and other specific analyses.Bad debt expense and write-offs were not material for the years ended December31, 2010, 2009 and 2008. Item 6 Cash and Cash Equivalents Short-term, highly liquid investments with maturities of three months or less when purchased are classified as cash and cash equivalents on the Consolidated Balance Sheets and are recorded at cost, which approximates fair value. Restricted cash and cash equivalents on the Consolidated Balance Sheets are primarily held to meet certain projected self-insurance obligations and are recorded at cost, which approximates f air value.According to Note 2, at December31, 2010 and 2009, the company recorded $407million and $419million, respectively, in restricted cash, cash equivalents and short-term investments and $33million and $16million, respectively, in other noncurrent assets on the Consolidated Balance Sheets. Item 7 short-term Investments Investments with maturities of greater than three months, but not in excess of one year, when purchased are classified as short-term investments on the companys Consolidated Balance Sheets.At December 31, 2010, the short-term investments are treasury bills recorded at cost, which approximates fair value. At December31, 2009, the short-term investments were invested in a money market fund that was recorded at fair value and liquidated in an orderly manner in 2010. According to Note 2 in the 2010 Annual Report, at December31, 2010, short-term investments on the Consolidated Balance Sheet consisted of treasury bills and were recorded at cost, which approximates fai r value. During the year ended December31, 2010, Delta Air Lines, Inc. eceived $77million from an investment in a money market fund that was liquidated in an orderly manner, $71million of which was recorded in short-term investments on the Consolidated Balance Sheet at December31, 2009. This investment was classified in level 3 of the three-tier fair value hierarchy due to uncertainty regarding the timing and pass judgment amount of the distribution. Item 8 Revenue Recognition Delta Air Lines, Inc. recorded the sales of passenger tickets in air traffic liability on the Consolidated Balance Sheets.Passenger revenue is recognized when they provide deportee or when the ticket expires unused, reducing the related air traffic liability. The company periodically evaluates the estimated air traffic liability and records any adjustments in their Consolidated Statements of Operations. These adjustments relate primarily to refunds, modifys, transactions with other airlines and other items for which final settlement occurs in periods subsequent to the sale of the related tickets at amounts other than the authoritative sales price.This company is required to charge certain taxes and fees on passenger tickets, including U. S. federal transportation taxes, federal security charges, airport passenger knack charges and foreign arrival and departure taxes. These taxes and fees are legal assessments on the customer for which Delta Air Lines, Inc. acts as a collection agent. Because they are not empower to retain these taxes and fees, they do not include such amounts in passenger revenue. The company records a liability when the amounts are collected and reduce the liability when payments are ade to the applicable government agency or operating carrier. Item 9 Goodwill and Other Intangible Assets Delta Air Lines, Inc. applies a fair value-based impairment test to the net book value of free grace and indefinite-lived intangible assets on an annual basis and, if certain ev ents or circumstances indicate that an impairment loss may have been incurred, on an interim basis. The annual impairment test date for goodwill and indefinite-lived intangible assets is October 1. They value goodwill and identified intangible assets primarily using the income approach valuation technique.These measurements include the following significant unobservable inputs the projected revenues, expenses and cash flows, an estimated weighted average cost of capital, assumed discount rates depending on the asset anda tax rate. These assumptions are consistent with those hypothetical market participants would use. Since the company is required to make estimates and assumptions when evaluating goodwill and indefinite-lived intangible assets for impairment, the actual amounts may differ materially from these estimates. Changes in assumptions or circumstances could result in impairment.Factors which could cause impairment include, but are not limited to, negative campaigns in our m arket capitalization, an increase in fuel prices, declining passenger mile yields, lower passenger demand as a result of the weakened U. S. and global economy,interruption to the operations due to an employee strike, terrorist attack, or other reasons,changes to the regulatory surround andconsolidation of competitors in the airline industry. According to Note 4, during 2008, Delta Air Lines, Inc. experienced a significant decline in market capitalization primarily from record high fuel prices and overall airline industry conditions.In addition, the resolve of their intention to merge with Northwest established a stock exchange ratio based on the relative valuation of Delta and Northwest It was determined that these factors combined with further increases in fuel prices were an indicator that a goodwill impairment test was required. As a result, they estimated fair value based on a discounted projection of future cash flows, supported with a market-based valuation. The company deter mined that goodwill was impaired and recorded a non-cash charge of $6. 9billion for the year ended December31, 2008.Item 10 Inventories Inventories of sacrificeable split related to flight equipment are carried at moving average cost and charged to operations as consumed. An allowance for obsolescence is provided over the remaining useful life of the related fleet for spare parts expected to be available at the date aircraft are retired from service. The company also provided allowances for parts identified as excess or obsolete to reduce the carrying costs to the lower of cost or net realizable value. These parts are assumed to have an estimated residual value of 5% of the original cost.Conclusion Closing Statements In summation, Delta Air Lines, Inc. is not a highly profitable company. Although it is currently a major airline in the United States and grew through the addition of routes and the acquisition of other airlines, they are not performing so well due to the economic rec ession. The current economic environment has taken a toll on the company, like most companies throughout the United States in the last few years. Delta Air Lines, Inc. is not as liquid as it would like to be, and the coverage ratios are being affected.Over the last few years, the companys profitability has increased in all facets. If this trend continues, Delta Air Lines, Inc. will be on its way to becoming more liquid and therefore, more financially stable. Delta Air Lines, Inc. management seems to be nerve-racking to efficiently utilize all its resources but is falling short in placing this company in a promising financial position. If this company continues to have a bun in the oven their business in the same manner and direction as they have thus far, then they will fall short of continuing to be a profitable and successful company for years to come.