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 | 27,892 | 27,667 | 25,306 |
Service | 5,073 | 4,765 | 4,099 |
Unallocated coporate costs | 803 | 914 | 443 |
33,768 | 33,346 | 29,848 | |
3,445 | 2,180 | 1,976 | |
Other income (expenses), net | (449) | (121) | 43 |
Operating profit | 2,996 | 2,059 | 2,019 |
Interest expense | 370 | 425 | 487 |
Earnings before taxes | 2,626 | 1,634 | 1,532 |
Income tax expense | 801 | 368 | 479 |
Net earnings | $ 1,825 | $ 1,266 | $ 1,053 |
Balance Sheet | ||
---|---|---|
December 31 (In millions) | 2005 | 2004 |
Assets | ||
Cash and cash equivalents | $ 2,484 | $ 1,100 |
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 | 10,769 | 8,993 |
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 | $ 27,984 | $ 25,594 |
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 | 4,784 | 5,224 |
Accrued pension liabilities | 2,217 | 1,580 |
Other postretirement benefit liabilities | 1,277 | 1,236 |
Other liabilities | 2,411 | 1,967 |
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 | $ 27,984 | $ 25,594 |
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 | (244) | (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 | (179) | (708) | (1,461) |
Financing Activities | |||
repayment of long-term debt | (253) | (1,049) | (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 | (1,631) | (2,126) | (2,076) |
Net increase (decrease) in cash and cash equivalents | 1,384 | 90 | (1,728) |
Cash and cash equivalents at beginning of year | 1,100 | 1,010 | 2,738 |
Cash and cash equivalents at end of year | $ 2,484 | $ 1,100 | $ 1,010 |
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 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 2005 and 2004? (Select all that apply) Answernoyes Lockheed Martin's free operating cash flow to total debt ratio increased slightly over the year 2005 due to increased cash flow from operations and decreased levels of debt. Answernoyes Lockheed Martin's cash from operations to total debt ratio increased slightly over the year 2005 due to increased cash flow from operations and decreased levels of debt. Answeryesno Lockheed Martin's times interest earned increased significantly during 2005, due to both an increase in profitability and a decrease in interest expense. Answernoyes Lockheed Martin's times interest earned decreased significantly during 2005, due to both a decrease in profitability and an increase in interest expense.
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