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. Consolidated Statements of Earnings Year Ended December 31 (In millions) 2016 2015 Net sales Products Services Total net sales Cost of sales Products Services Severance and other charges Other unallocated costs Total cost of sales Gross Profit Other income, net Operating profit Interest expense Other non-operating income (expense), net Earnings before taxes Income tax expense $40,365 $34,868 6,883 5,668 47,248 40,536 (36,616) (31,091) (6,040) (4,824) (80) (82) 550 (47) (42,186) (36,044) 5,062 4,492 487 220 5,549 4,712 (663) (443) 30 4,886 4,299 (1,133) (1,173) 3,753 3,126 479 Net earnings from continuing operations Net (loss) earnings from discontinued operations Net earnings 1,549 $5,302 $3,605 Consolidated Balance Sheets December 31 (in millions, except par value) 2016 2015 Assets Current Assets Cash and cash equivalents Receivables, net $ 1,837 $1,090 8,202 7,254 Inventories, net Other current assets Assets of discontinued operations Total current assets Property, plant and equipment, net Goodwill Intangible assets, net Deferred income taxes 15,108 4,670 4,819 399 441 - 969 14,573 5,549 5,389 10,764 10,695 4,093 4,022 6,625 6,068 5,667 5,396 - 3,161 Other noncurrent assets Assets of discontinued operations Total assets $ 47,806 $ 49,304 Liabilities and stockholders' equity Current Liabilities Accounts payable $1,653 $1,745 Customer advances and amounts in excess of costs incurred 6,776 6,703 Salaries, benefits and payroll taxes 1,764 1,707 Current maturities of long-term debt 956 Other current liabilities 2,349 1,859 Liabilities of discontinued operations 948 Total current liabilities 12,542 13.918 Long-term debt 14,282 14,305 Accrued pension liabilities 13,855 11,807 Other post-retirement benefit liabilities 862 1,070 Other noncurrent liabilities 4,659 Liabilities of discontinued operations - Total Liabilities 46,200 4,902 205 46,207 Stockholders' equity Common stock, $1 par value per share Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total stockholders' equity Total liabilities and stockholders' equity 289 303 - 13,324 14,238 (12,102) (11,444) 1,606 3,097 $ 47,806 $49,304 Operating Activities Net earnings Consolidated Statement of Cash Flows Year Ended December 31 (in millions) Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Stock-based compensation Deferred income taxes Severancecharges Gain on divestiture of IS&GS business 2016 2015 $5,302 $3,605 1,215 1,026 149 138 (152) (445) 99 102 (1,242) (104) Gain on step acquisition of AWE Changes in operating assets and liabilities: Receivables, net (811) (256) Inventories, net (46) (398) Accounts payable (188) (160) Customer advances and amounts in excess of costs incurred 3 (32) Post-retirement benefit plans 1,028 1,068 Income taxes 146 (48) Other, net (210) 501 Net cash provided by operating activities 5,189 5,101 Investing Activities Capital expenditures Acquisition of business/investments in affiliated Other, net (1,063) (939) (9,003) 78 208 Net cash used for investing activities (985) (9,734) Financing Activities Special cash payment from divestiture of IS&GS business 1,800 Repurchases of common stock (2,096) (3,071) Proceeds from stock option exercises Dividends paid Proceeds from the issuance of long-term debt Repayments of long-term debt 106 (2,048) (1,932) (952) 9,101 174 Proceeds from borrowings under revolving credit facilities Repayments from borrowings under revolving credit facilities Other, net Net cash (used for) financing activities Net change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year - 6,000 - (6,000) (267) 5 (3,457) 4,277 747 (356) 1,090 1,446 $1,837 $1,090 (c) Compute times interest earned ratio, cash from operations to total debt ratio, and free operating cash flow to total debt ratios. (Round your answers to two decimal places.) 2016 times interest earned = 0 2015 times interest earned = 0 2016 cash from operations to total debt = 0 2015 cash from operations to total debt = 0 2016 free operating cash flow to total debt = 0 2015 free operating cash flow to total debt = 0 Which of the following describes the company's times interest earned, cash from operations to total debt, and free operating cash flow to total debt ratios for 2016 and 2015? (Select all that apply) Lockheed Martin's free operating cash flow to total debt ratio slightly decreased over the year 2016 due to decreased cash flow from operations. Lockheed Martin's times interest earned decreased during 2016, due an increase in interest expense. Lockheed Martin's cash from operations to total debt ratio slightly increased over the year 2016 due to a decrease in total debt. Lockheed Martin's times interest earned increased during 2016, due to an increase in profitability. (d) Summarize your findings in a conclusion about the company's credit risk. Do you have any concerns about the company's ability to meet its debt obligations? OLockheed Martin's total debt-to-equity is low, thus increasing any immediate solvency concerns. The company's ability to meet its debt requirements will depend on increasing short-term debt. OLockheed Martin's quick ratio is low, thus increasing immediate solvency concerns. The company's ability to meet its debt requirements will depend on liquidating inventories for emergency cash. OLockheed Martin's times interest earned ratio is strong, thus lessening any immediate solvency concerns. The company's ability to meet its debt requirements will depend on its continued profitability. OLockheed Martin's total liabilities-to-equity is high, thus lessening any immediate solvency concerns. The company's ability to meet its debt requirements will depend on its use of equity financing. Please answer all parts of the