Homework Answers
Part A
Current ratio = current assets / current liabilities
2016 =15108/12542 = 1.20
2015 = 14573/13918 = 1.05
Quick ratio = (Cash and cash equivalents + receivables)/ current liabilities
2016 = (1837+8202)/ 12542 = 0.80
2015 = (1090+7254)/ 13918 = 0.60
Both the current and quick ratios have increased from 2015 to 2016, meaning the company is liquid.
Part B
Total liabilities-to-stockholders’ equity = total liabilities / total stockholders’ equity
2016 = 46200/1606 = 28.77
2015 = 46207/3097 = 14.92
Total debt-to-equity = total debt / total stockholders’ equity
2016 = (46200-12542)/1606 = 20.96
2015 = (46207-13918)/3097 = 10.43
Both the total liabilities-to-equity and total debt-to-equity ratios have increased from 2015 to 2016. These increase suggest that the company is less solvent.
Part C
Times interest earned ratio = operating profit / interest expense
2016: 5549/663 = 8.37
2015: 4712/443 = 10.64
Cash flow from operations to total debt = cash flow from operating activities / total debt
2016: 5189/(47806-1606) = 0.11
2015: 5101/(49304-3097) = 0.11
Free cash flow from operations to total debt = free cash flow / total debt
2016: (5189-1063)/(47806-1606) = 0.09
2015: (5101-939-9003)/(49304-3097) = -0.10
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Compute and Interpret Liquidity, Solvency and Coverage Ratios Balance sheets and income statements for Lockheed Martin...
Compute and Interpret Liquidity, Solvency and Coverage Ratios Balance sheets and income statements for Lockheed Martin...
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