Question
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
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 | 27,882 | 27,637 | 25,306 |
Service | 5,073 | 4,765 | 4,099 |
Unallocated coporate costs | 803 | 914 | 443 |
33,758 | 33,316 | 29,848 | |
3,455 | 2,210 | 1,976 | |
Other income (expenses), net | (449) | (121) | 43 |
Operating profit | 3,006 | 2,089 | 2,019 |
Interest expense | 370 | 425 | 487 |
Earnings before taxes | 2,636 | 1,664 | 1,532 |
Income tax expense | 811 | 398 | 479 |
Net earnings | $ 1,825 | $ 1,266 | $ 1,053 |
Balance Sheet | ||
---|---|---|
December 31 (In millions) | 2005 | 2004 |
Assets | ||
Cash and cash equivalents | $ 2,164 | $ 780 |
Short-term investments | 429 | 396 |
Receivables | 4,579 | 4,094 |
Inventories | 1,921 | 1,864 |
Deferred income taxes | 861 | 982 |
Other current assets | 495 | 557 |
Total current assets | 10,449 | 8,673 |
Property, plant and equipment, net | 3,924 | 3,599 |
Investments in equity securities | 196 | 812 |
Goodwill | 8,447 | 7,892 |
Purchased intangibles, net | 560 | 672 |
Prepaid pension asset | 1,360 | 1,030 |
Other assets | 2,728 | 2,596 |
Total assets | $ 27,664 | $ 25,274 |
Liabilities and stockholders' equity | ||
Accounts payable | $ 1,998 | $ 1,726 |
Customer advances and amounts in excess of costs incurred | 4,331 | 4,028 |
Salaries, benefits and payroll taxes | 1,475 | 1,346 |
Current maturities of long-term debt | 202 | 15 |
Other current liabilities | 1,422 | 1,451 |
Total current liabilities | 9,428 | 8,566 |
Long-term debt | 4,664 | 5,264 |
Accrued pension liabilities | 2,097 | 1,300 |
Other postretirement benefit liabilities | 1,277 | 1,236 |
Other liabilities | 2,331 | 1,887 |
Stockholders' equity | ||
Common stock, $1 par value per share | 432 | 438 |
Additional paid-in capital | 1,724 | 2,223 |
Retained earnings | 7,278 | 5,915 |
Accumulated other comprehensive loss | (1,553) | (1,532) |
Other | (14) | (23) |
Total stockholders' equity | 7,867 | 7,021 |
Total liabilities and stockholders' equity | $ 27,664 | $ 25,274 |
Consolidated Statement of Cash Flows | |||
---|---|---|---|
Year Ended December 31 (In millions) | 2005 | 2004 | 2003 |
Operating Activities | |||
Net earnings | $ 1,825 | $ 1,266 | $ 1,053 |
Adjustments to reconcile net earnings to net cash provided by operating activities | |||
Depreciation and amortization | 555 | 511 | 480 |
Amortization of purchased intangibles | 150 | 145 | 129 |
Deferred federal income taxes | 24 | (58) | 467 |
Changes in operating assets and liabilities: | |||
Receivables | (390) | (87) | (258) |
Inventories | (39) | 519 | (94) |
Accounts payable | 239 | 288 | 330 |
Customer advances and amounts in excess of costs incurred | 296 | (228) | (285) |
Other | 534 | 568 | (13) |
Net cash provided by operating activities | 3,194 | 2,924 | 1,809 |
Investing Activities | |||
Expenditures for property, plant and equipment | (865) | (769) | (687) |
Acquisition of business/investments in affiliated companies | (84) | (91) | (821) |
Proceeds from divestiture of businesses/Investments in affiliated companies | 935 | 279 | 234 |
Purchase of short-term investments, net | (33) | (156) | (240) |
Other | 28 | 29 | 53 |
Net cash used for investing activities | (19) | (708) | (1,461) |
Financing Activities | |||
repayment of long-term debt | (413) | (1,369) | (2,202) |
Issuances of long-term debt | -- | -- | 1,000 |
Long-term debt repayment and issuance costs | (12) | (163) | (175) |
Issuances of common stock | 406 | 164 | 44 |
Repurchases of common stock | (1,310) | (673) | (482) |
Common stock dividends | (462) | (405) | (261) |
Net cash used for financing activities | (1,791) | (2,446) | (2,076) |
Net increase (decrease) in cash and cash equivalents | 1,384 | (230) | (1,728) |
Cash and cash equivalents at beginning of year | 780 | 1,010 | 2,738 |
Cash and cash equivalents at end of year | $ 2,164 | $ 780 | $ 1,010 |
(a) Compute Lockheed Martin's current ratio and quick ratio for 2005 and 2004. (Round your answers to two decimal places.) 2005 current ratio = Answer
2004 current ratio = Answer
2005 quick ratio = Answer
2004 quick ratio = Answer
Which of the following best describes the company's current ratio and quick ratio for 2005 and 2004?
The current ratio has increased while the quick ratio has decreased in the period from 2004 to 2005, which suggests the company has a shortage of liquid assets.
Both the current and quick ratios have decreased from 2004 to 2005. The company is fairly illiquid.
Both the current and quick ratios have increased from 2004 to 2005. The company is fairly liquid.
The current ratio has decreased while the quick ratio has increased in the period from 2004 to 2005, which suggests the company has a shortage of current assets.
(b) Compute total liabilities-to-equity ratios and long-term debt-to-equity ratios for 2005 and 2004. (Round your answers to two decimal places. For long-term debt-to-equity calculations, use the debt-to-equity ratio.) 2005 total liabilities-to-stockholders' equity = Answer
2004 total liabilities-to-stockholders' equity = Answer
2005 long-term debt-to-equity = Answer
2004 long-term debt-to-equity = Answer
Which of the following best describes the company's total liabilities-to-equity ratios and long-term debt-to-equity ratios for 2005 and 2004?
The total liabilities-to-equity ratio has decreased while the long-term debt-to-equity ratio has increased in the period from 2004 to 2005, which suggests the company has decreased the use of short-term debt financing.
The total liabilities-to-equity ratio has increased while the long-term debt-to-equity ratio has decreased in the period from 2004 to 2005, which suggests the company has increased the use of short-term debt financing.
Both the total liabilities-to-equity and long-term debt-to-equity ratios have increased from 2004 to 2005. These increases suggest that the company is less solvent.
Both the total liabilities-to-equity and long-term debt-to-equity ratios have decreased from 2004 to 2005. The difference between these two measures reveals that any solvency concerns would be for the short run.
(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.) 2005 times interest earned = Answer
2004 times interest earned = Answer
2005 cash from operations to total debt = Answer
2004 cash from operations to total debt = Answer
2005 free operating cash flow to total debt = Answer
2004 free operating cash flow to total debt = Answer
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