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 (a) Compute Lockheed Martin's current ratio and quick ratio for 2016 and 2015. (Round your answers to two decimal places.) 2016 current ratio = 0 2015 current ratio = 0 2016 quick ratio = 0 2015 quick ratio = 0 Which of the following best describes the company's current ratio and quick ratio for 2016 and 2015? OThe current ratio has increased while the quick ratio has decreased in the period from 2015 to 2016, which suggests the company has a shortage of liquid assets. OBoth the current and quick ratios have decreased from 2015 to 2016 however, the company is liquid. OBoth the current and quick ratios have increased from 2015 to 2016, meaning the company is liquid. OThe current ratio has decreased while the quick ratio has increased from 2015 to 2016, which suggests the company has a shortage of current assets. (b) Compute total liabilities-to-equity ratios and total debt-to-equity ratios for 2016 and 2015. (Round your answers to two decimal places.) 2016 total liabilities-to-stockholders' equity = 0 2015 total liabilities-to-stockholders' equity = 0 2016 total debt-to-equity = 0 2015 total debt-to-equity = 0 Which of the following best describes the company's total liabilities-to-equity ratios and total debt-to-equity ratios for 2016 and 2015? OThe total liabilities-to-equity ratio has decreased while the total debt-to-equity ratio has increased in the period from 2015 to 2016, which suggests the company has decreased the use of short-term debt financing. OThe total liabilities-to-equity ratio has increased while the total debt-to-equity ratio has decreased in the period from 2015 to 2016, which suggests the company has increased the use of short-term debt financing. OBoth the total liabilities-to-equity and total debt-to-equity ratios have increased from 2015 to 2016. These increases suggest that the company is less solvent. OBoth the total liabilities-to-equity and total debt-to-equity ratios have decreased from 2015 to 2016. The difference between these two measures reveals that any solvency concerns would be for the short run