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. 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 27,932 27,637 25,306 Service 5,073 4,765 4,099 Unallocated coporate costs 803 914 443 33,808 33,316 29,848 3,405 2,210 1,976 Other income (expenses), net (449) (121) 43 Operating profit 2,956 2,089 2,019 Interest expense 370 425 487 Earnings before taxes 2,586 1,664 1,532 Income tax expense 761 368 479 Net earnings $ 1,825 $1,296 $1,053

a. compute quick ratio

b. total debt-to-equity

Answer 1

Formula	Quick ratio =	(Cash + Short-term Marketable Securities + Receivables)/Current Liabilities
		2005	2004
	Cash =	2124	1080
	Short term Marketable Securities =	429	396
	Receivables =	4579	4094
	Total (A)	7132	5570
	Current Liabilities =	9428	8566
	Quick ratio = A/ CL	0.76	0.65

Formula	Debt to equity =	Total debt / Total equity
		2005	2004
	Long Term Debt	4944	5184
	Total Shareholders Equity =	7867	7021
	Debt to equity =	0.63	0.74
Formula	Cash From Operations to Total Debt	Cash From Operations/ Total Debt
		2005	2004
	Cash From Operations	3194	2924
	Long Term Debt	4944	5184
	Cash From Operations to Total Debt	0.65	0.56
Formula	Free Operating Cash flow to Total Debt
	​FCF= Operating Cash Flow − Capital Expenditures​
		2005	2004
	Cash From Operations	3194	2924
	Capital Expenditures
	Depreciation and amortization	555	511
	Amortization of intangibles	150	145
		705	656
	​FCF= Operating Cash Flow − Capital Expenditures​	2489	2268
	Long Term Debt	4944	5184
	Free Operating Cash flow to Total Debt	0.50	0.44