Year Ended December 31 (In millions) 2005 2004 2003 Net sales Products $ 31,518 5 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 (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 = 0 2004 times interest earned = 0 2005 cash from operations to total debt = 0 2004 cash from operations to total debt = 0 2005 free operating cash flow to total debt = 0 2004 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 2005 and 2004? (Select all that apply) 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. 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. Lockheed Martin's times interest earned increased significantly during 2005, due to both an increase in profitability and a decrease in interest expense. Lockheed Martin's times interest earned decreased significantly during 2005, due to both a decrease in profitability and an increase in interest expense. (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 very 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 very 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 high, 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 question. Year Ended December 31 (In millions) 2005 2004 2003 Net sales Products $ 31,518 5 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 (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 = 0 2004 times interest earned = 0 2005 cash from operations to total debt = 0 2004 cash from operations to total debt = 0 2005 free operating cash flow to total debt = 0 2004 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 2005 and 2004? (Select all that apply) 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. 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. Lockheed Martin's times interest earned increased significantly during 2005, due to both an increase in profitability and a decrease in interest expense. Lockheed Martin's times interest earned decreased significantly during 2005, due to both a decrease in profitability and an increase in interest expense. (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 very 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 very 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 high, 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