American Airlines

Definition

American Airlines is one of the largest airline companies in the United States, offering domestic and international flights. It is a publicly traded company that raises capital through equity and debt financing to fund its operations and expansion.

5 Must Know Facts For Your Next Test

1. American Airlines issues common stock as part of its equity financing strategy.
2. The company uses both short-term and long-term debt instruments to raise capital.
3. American Airlines' cost of equity can be calculated using the Capital Asset Pricing Model (CAPM).
4. The firm's weighted average cost of capital (WACC) takes into account both its equity and debt financing costs.
5. Changes in interest rates directly impact American Airlines' cost of debt and overall WACC.

Review Questions

• How does American Airlines raise capital through equity financing?
• What methods does American Airlines use for debt financing?
• Why is it important for American Airlines to calculate its weighted average cost of capital (WACC)?

Related terms

Equity Financing: Raising capital by selling shares of stock in the company.

Debt Financing: Raising capital by borrowing funds that must be repaid with interest.

Weighted Average Cost of Capital (WACC): The average rate of return a company is expected to pay its security holders to finance its assets.