a. compute quick ratio
b. total debt-to-equity
Compute and interpret Liquidity, Solvency and Coverage Ratios Balance sheets and income statements for Lockheed Martin Corporation follow. Refer to these financial statements to answer the requirements. Income Statement Year Ended December 31 (In millions) 2005 2004 2003 Net sales Products $ 31,518 $30,202 $ 27,290 Service 5,695 5,324 4,534 37,213 35,526 31,824 Cost of sales Products 27,932 27,637 25,306 Service 5,073 4,765 4,099 Unallocated coporate costs 803 914 443 33,808 33,316 29,848 3,405 2,210 1,976 Other income (expenses), net (449) (121) 43 Operating profit 2,956 2,089 2,019 Interest expense 370 425 487 Earnings before taxes 2,586 1,664 1,532 Income tax expense 761 368 479 Net earnings $ 1,825 $1,296 $1,053 2005 2004 Balance Sheet December 31 (In millions) Assets Cash and cash equivalents Short-term investments Receivables Inventories Deferred income taxes Other current assets Total current assets Property, plant and equipment, net Investments in equity securities Goodwill Purchased intangibles, net Prepaid pension asset Other assets Total assets Liabilities and stockholders' equity Accounts payable Customer advances and amounts in excess of costs incurred Salaries, benefits and payroll taxes Current maturities of long-term debt Other current liabilities Total current liabilities Long-term debt Accrued pension liabilities Other postretirement benefit liabilities Other liabilities Stockholders' equity $ 2,124 $ 1,080 429 396 4,579 4,094 1,921 1,864 861 982 495 557 10,409 8,973 3,924 3,599 196 812 8,447 7,892 560 672 1,360 1,030 2,728 2,596 $ 27,624 $ 25,574 $ 1,998 4,331 1,475 202 1,422 9,428 4,944 1,617 1,277 2,491 $ 1,726 4,028 1,346 15 1,451 8,566 5,184 1,760 1,236 1,807 4 Stockholders' equity Common stock, $1 par value per share Additional paid-in capital Retained earnings Accumulated other comprehensive loss Other Total stockholders' equity Total liabilities and stockholders' equity 432 438 1,724 2,223 7,278 5,915 (1,553) (1,532) (14) (23) 7,867 7,021 $ 27,624 $ 25,574 2005 2004 2003 $ 1,825 $1,266 $ 1,053 Consolidated Statement of Cash Flows Year Ended December 31 (In millions) Operating Activities Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization Amortization of purchased intangibles Deferred federal income taxes Changes in operating assets and liabilities: Receivables Inventories Accounts payable 555 150 24 511 145 (58) 480 129 467 (390) (39) 239 296 534 3,194 (87) 519 288 (228) 568 2,924 (258) (94) 330 (285) (13) 1,809 Customer advances and amounts in excess of costs incurred Other Net cash provided by operating activities Investing Activities Expenditures for property, plant and equipment Acquisition of business/investments in affiliated companies Proceeds from divestiture of businesses/investments in affiliated companies Purchase of short-term investments, net Other (865) (784) 935 (33) 28 (769) (91) 279 (156) - 29 (687) (821) 234 (240) 53 28 (719) 29 53 (708) (1,461) Other Net cash used for investing activities Financing Activities repayment of long-term debt Issuances of long-term debt Long-term debt repayment and issuance costs Issuances of common stock Repurchases of common stock Common stock dividends Net cash used for financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year (53) (1,069) (2,202) - 1.000 (12) (163) (175) 406 164 44 (1,310) (673) (482) (462) (405) (261) (1.431) 2,146) (2.076) 1,044 70 (1.728) 1.080 1.010 2.738 $ 2,124 $1,080 5 1,010 Support 2005 quick ratio = 0.81 HC 2004 quick ratio = 0.72 2005 total debt-to-equity = 2.51 X 2004 total debt-to-equity = 2.64 2005 cash from operations to total debt = 0.12 2004 cash from operations to total debt = 0.17 2005 free operating cash flow to total debt = 0 2004 free operating cash flow to total debt = 0
