Compute and Interpret Liquidity, Solvency and Coverage Ratios Balance sheets and

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 the requirements.

1. Compute Lockheed Martin's quick ratio for 2005 and 2004. (Round your answers to two decimal places.)

2005 quick ratio = Answer

2004 quick ratio = Answer

2. Compute total debt-to-equity ratios for 2005 and 2004. (Round your answers to two decimal places.)

2005 total debt-to-equity = Answer

2004 total debt-to-equity = Answer

3.  Compute cash from operations to total debt ratio, and free operating cash flow to total debt ratios. (Round your answers to two decimal places.)

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

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

Explanation / Answer

Req 1: 2005 2004 Current Assets 495 557 Current Liabilities 1422 1451 Current ratio 0.35 0.38 i.e. Current Assets / Current Liabilities Currrent ratio Year 2004 0.38 Year 2005 0.35 Req 2: 2005 2004 Total outside debts 19797 18253 Total Stockholder's Equity 7867 7021 Total Debt to equity 2.52 2.6 (Total debts /Equity) Debt to Equity Year 2004 2.52 Year 2005 2.6 Req 3: 2005 2004 Cash From Operating Activities 3194 2924 Cash from Investing Activities -19 -708 Free Cash flows 3175 2216 (Cash from Operating-Investing) Total debts 19797 18253 Cash from Operations to Total debts 0.161 0.16 (i.e. Cash from Operating Act/ Total debts) Free cash from op. to Total debts 0.16 0.121405 0.12 Cash from Operation to total debts 2004:    0.16 Free cash to total debts 2005:     0.16 Free cash to total debts 2004:     0.12

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