Compute and Interpret Liquidity, Solvency and Coverage Ratios Balance sheets and income statements for Lockheed Martin C
Posted: Sun Jul 03, 2022 3:57 pm
Compute and Interpret Liquidity, Solvency and CoverageRatiosBalance sheets and income statements for Lockheed MartinCorporation follow. Refer to these financial statements to answerthe requirements.
(a) Compute Lockheed Martin's current ratio and quick ratio for2005 and 2004. (Round your answers to two decimal places.)2005 current ratio = Answer2004 current ratio = Answer2005 quick ratio = Answer2004 quick ratio = AnswerWhich of the following best describes the company's current ratioand quick ratio for 2005 and 2004?
The current ratio has increased while the quick ratio hasdecreased in the period from 2004 to 2005, which suggests thecompany has a shortage of liquid assets.
Both the current and quick ratios have increased from 2004 to2005. The company is fairly liquid.
Both the current and quick ratios have decreased from 2004 to2005. The company is fairly illiquid.
The current ratio has decreased while the quick ratio hasincreased in the period from 2004 to 2005, which suggests thecompany has a shortage of current assets.
(b) Compute total liabilities-to-equity ratios and totaldebt-to-equity ratios for 2005 and 2004. (Round your answers to twodecimal places.)2005 total liabilities-to-stockholders' equity = Answer2004 total liabilities-to-stockholders' equity = Answer2005 total debt-to-equity = Answer2004 total debt-to-equity = AnswerWhich of the following best describes the company's totalliabilities-to-equity ratios and total debt-to-equity ratios for2005 and 2004?
The total liabilities-to-equity ratio has decreased while thetotal debt-to-equity ratio has increased in the period from 2004 to2005, which suggests the company has decreased the use ofshort-term debt financing.
The total liabilities-to-equity ratio has increased while thetotal debt-to-equity ratio has decreased in the period from 2004 to2005, which suggests the company has increased the use ofshort-term debt financing.
Both the total liabilities-to-equity and total debt-to-equityratios have decreased from 2004 to 2005. The difference betweenthese two measures reveals that any solvency concerns would be forthe short run.
Both the total liabilities-to-equity and total debt-to-equityratios have increased from 2004 to 2005. These increases suggestthat the company is less solvent.
(c) Compute times interest earned ratio, cash from operations tototal debt ratio, and free operating cash flow to total debtratios. (Round your answers to two decimal places.)2005 times interest earned = Answer2004 times interest earned = Answer2005 cash from operations to total debt = Answer2004 cash from operations to total debt = Answer2005 free operating cash flow to total debt = Answer2004 free operating cash flow to total debt = AnswerWhich of the following describes the company's times interestearned, cash from operations to total debt, and free operating cashflow to total debt ratios for 2005 and 2004? (Select all thatapply)Answeryesno Lockheed Martin's times interest earned decreasedsignificantly during 2005, due to both a decrease in profitabilityand an increase in interest expense.Answeryesno Lockheed Martin's free operating cash flow tototal debt ratio increased slightly over the year 2005 due toincreased cash flow from operations and decreased levels ofdebt.Answeryesno Lockheed Martin's cash from operations to totaldebt ratio increased slightly over the year 2005 due to increasedcash flow from operations and decreased levels of debt.Answeryesno Lockheed Martin's times interest earned increasedsignificantly during 2005, due to both an increase in profitabilityand a decrease in interest expense.(d) Summarize your findings in a conclusion about the company'scredit risk. Do you have any concerns about the company's abilityto meet its debt obligations?
Lockheed Martin's total debt-to-equity is very low, thusincreasing any immediate solvency concerns. The company's abilityto meet its debt requirements will depend on increasing short-termdebt.
Lockheed Martin's times interest earned ratio is high, thuslessening any immediate solvency concerns. The company's ability tomeet its debt requirements will depend on its continuedprofitability.
Lockheed Martin's quick ratio is very low, thus increasingimmediate solvency concerns. The company's ability to meet its debtrequirements will depend on liquidating inventories for emergencycash.
Lockheed Martin's total liabilities-to-equity is high, thuslessening any immediate solvency concerns. The company's ability tomeet its debt requirements will depend on its use of equityfinancing.
(a) Compute Lockheed Martin's current ratio and quick ratio for2005 and 2004. (Round your answers to two decimal places.)2005 current ratio = Answer2004 current ratio = Answer2005 quick ratio = Answer2004 quick ratio = AnswerWhich of the following best describes the company's current ratioand quick ratio for 2005 and 2004?
The current ratio has increased while the quick ratio hasdecreased in the period from 2004 to 2005, which suggests thecompany has a shortage of liquid assets.
Both the current and quick ratios have increased from 2004 to2005. The company is fairly liquid.
Both the current and quick ratios have decreased from 2004 to2005. The company is fairly illiquid.
The current ratio has decreased while the quick ratio hasincreased in the period from 2004 to 2005, which suggests thecompany has a shortage of current assets.
(b) Compute total liabilities-to-equity ratios and totaldebt-to-equity ratios for 2005 and 2004. (Round your answers to twodecimal places.)2005 total liabilities-to-stockholders' equity = Answer2004 total liabilities-to-stockholders' equity = Answer2005 total debt-to-equity = Answer2004 total debt-to-equity = AnswerWhich of the following best describes the company's totalliabilities-to-equity ratios and total debt-to-equity ratios for2005 and 2004?
The total liabilities-to-equity ratio has decreased while thetotal debt-to-equity ratio has increased in the period from 2004 to2005, which suggests the company has decreased the use ofshort-term debt financing.
The total liabilities-to-equity ratio has increased while thetotal debt-to-equity ratio has decreased in the period from 2004 to2005, which suggests the company has increased the use ofshort-term debt financing.
Both the total liabilities-to-equity and total debt-to-equityratios have decreased from 2004 to 2005. The difference betweenthese two measures reveals that any solvency concerns would be forthe short run.
Both the total liabilities-to-equity and total debt-to-equityratios have increased from 2004 to 2005. These increases suggestthat the company is less solvent.
(c) Compute times interest earned ratio, cash from operations tototal debt ratio, and free operating cash flow to total debtratios. (Round your answers to two decimal places.)2005 times interest earned = Answer2004 times interest earned = Answer2005 cash from operations to total debt = Answer2004 cash from operations to total debt = Answer2005 free operating cash flow to total debt = Answer2004 free operating cash flow to total debt = AnswerWhich of the following describes the company's times interestearned, cash from operations to total debt, and free operating cashflow to total debt ratios for 2005 and 2004? (Select all thatapply)Answeryesno Lockheed Martin's times interest earned decreasedsignificantly during 2005, due to both a decrease in profitabilityand an increase in interest expense.Answeryesno Lockheed Martin's free operating cash flow tototal debt ratio increased slightly over the year 2005 due toincreased cash flow from operations and decreased levels ofdebt.Answeryesno Lockheed Martin's cash from operations to totaldebt ratio increased slightly over the year 2005 due to increasedcash flow from operations and decreased levels of debt.Answeryesno Lockheed Martin's times interest earned increasedsignificantly during 2005, due to both an increase in profitabilityand a decrease in interest expense.(d) Summarize your findings in a conclusion about the company'scredit risk. Do you have any concerns about the company's abilityto meet its debt obligations?
Lockheed Martin's total debt-to-equity is very low, thusincreasing any immediate solvency concerns. The company's abilityto meet its debt requirements will depend on increasing short-termdebt.
Lockheed Martin's times interest earned ratio is high, thuslessening any immediate solvency concerns. The company's ability tomeet its debt requirements will depend on its continuedprofitability.
Lockheed Martin's quick ratio is very low, thus increasingimmediate solvency concerns. The company's ability to meet its debtrequirements will depend on liquidating inventories for emergencycash.
Lockheed Martin's total liabilities-to-equity is high, thuslessening any immediate solvency concerns. The company's ability tomeet its debt requirements will depend on its use of equityfinancing.