Module 4 - Assignment

9/25/14, 10:20 PM

Auritro Chatterjee
Home / MGMT-2600 / Module 4 / Module 4 - Assignment
Quiz navigation

Question

Not complete

Auritro Chatterjee
1

Finish attempt ...

Marked out of 1.00

Flag question

Compute and Interpret Z-score

Balance sheets and income statements for Lockheed Martin Corporation follow. Refer to
these nancial statements to answer the requirements.
Income Statement
Year Ended December 31
2005
2004
2003
(In millions)
Net sales
Products
$ 31,518 $ 30,202 $ 27,290
5,695
5,324
4,534
Service
Cost of sales
Products
Service
Unallocated coporate costs

Other income (expenses), net

Operating prot
Interest expense
Earnings before taxes
Income tax expense
Net earnings

37,213

35,526

31,824

28,800
5,073
803

27,879
4,765
914

25,306
4,099
443

34,676

33,558

29,848

2,537
449

1,968
121

1,976
43

2,986
370

2,089
425

2,019
487

2,616
791

1,664
398

1,532
479

$ 1,825 $ 1,266 $ 1,053

Balance Sheet
December 31 (In millions)

2005

2004

Assets
Cash and cash equivalents
Short-term investments
Receivables
Inventories
Deferred income taxes
Other current assets
Total current assets
Property, plant and equipment, net
Investments in equity securities
Goodwill
Purchased intangibles, net
Prepaid pension asset
Other assets
Total assets

Liabilities and stockholders' equity

Accounts payable
Customer advances and amounts in excess of costs incurred
Salaries, benets and payroll taxes
Current maturities of long-term debt
Other current liabilities

$ 2,244 $ 1,060
429
396
4,579
4,094
1,921
861
495

1,864
982
557

10,529
3,924
196
10,447
560

8,953
3,599
812
9,892
672

1,360
2,728

1,030
2,596

$ 29,744 $ 27,554

$ 1,998 $ 1,726
4,331
4,028
1,475
1,346
202
15
1,422
1,451

Total current liabilities

Long-term debt

9,428
4,784

8,566
5,104

Accrued pension liabilities

Other postretirement benet liabilities
Other liabilities

2,097
1,277
2,291

1,660
1,236
1,967

http://platform2.mybusinesscourse.com/mod/quiz/attempt.php?attempt=54555&page=5&scrollpos=0

Page 1 of 3

Module 4 - Assignment

9/25/14, 10:20 PM

Other liabilities
Stockholders' equity
Common stock, $1 par value per share
Additional paid-in capital

2,291

1,967

432
1,724

438
2,223

Retained earnings
Accumulated other comprehensive loss

7,278
(1,553)
(14)

7,915
(1,532)
(23)

9,867

9,021

Other
Total stockholders' equity
Total liabilities and stockholders' equity

$ 29,744 $ 27,554

Consolidated Statement of Cash Flows

Year Ended December 31 (In millions)
Operating Activities

2005

Net earnings

$
$
1,825 1,266

Adjustments to reconcile net earnings to net cash provided by operating

activities
Depreciation and amortization
Amortization of purchased intangibles
Deferred federal income taxes
Changes in operating assets and liabilities:
Receivables
Inventories
Accounts payable
Customer advances and amounts in excess of costs incurred
Other
Net cash provided by operating activities
Investing Activities
Expenditures for property, plant and equipment
Acquisition of business/investments in aliated companies
Proceeds from divestiture of businesses/Investments in aliated
companies
Purchase of short-term investments, net
Other
Net cash used for investing activities
Financing Activities
repayment of long-term debt
Issuances of long-term debt
Long-term debt repayment and issuance costs
Issuances of common stock
Repurchases of common stock
Common stock dividends
Net cash used for nancing activities
Net increase (decrease) in cash and cash equivalents

2004

2003
$
1,053

555
150

511
145

480
129

24

(58)

467

(390)
(39)
239

(87)
519
288

(258)
(94)
330

296
534

(228)
568

(285)
(13)

3,194 2,924

1,809

(865)
(564)

(769)
(91)

(687)
(821)

935

279

234

(33)
28

(156)
29

(240)
53

(499)

(708) (1,461)

(133) (1,089) (2,202)

--- 1,000
(12) (163) (175)
406
164
44
(1,310) (673) (482)
(462)

(405)

(261)

(1,511) (2,166) (2,076)

1,184
50 (1,728)

Cash and cash equivalents at beginning of year

1,060 1,010

2,738

Cash and cash equivalents at end of year

$
$
2,244 1,060

$
1,010

As of December 31, there were the approximate shares outstanding:

2005 - 434,264,432
2004 - 440,445,630
As of December 31, the company's stock closed at the following values:
2005 - $63.63
2004 - $55.55
(a) Compute and compare the Altman Z-scores for both years. (Do not round until your nal
answer; then round your answers to two decimal places.)
2005 z-score = 0
2004 z-score = 0

http://platform2.mybusinesscourse.com/mod/quiz/attempt.php?attempt=54555&page=5&scrollpos=0

Page 2 of 3

Module 4 - Assignment

9/25/14, 10:20 PM

Which of the following explain the trend in the Z-scores from 2004 to 2005? (Select all that
apply.)
The market value of Lockheed's equity improved somewhat over the year.
Lockheed decreased its liquidity due to an increase in retained earnings.
Lockheed improved its short-term liquidity by increasing cash.
Lcokheed improved its long-term liquidity by decreasing total liabilities.
(b) Which of the following statements best describes the company's Altman Z-scores?
The Altman Z-scores have increased from 2004 to 2005 which indicates the company's
bankruptcy risk has decreased.
Both the Altman Z-scores are above 3.00 which indicate the company has a very low
probability of bankruptcy.
Both the Altman Z-scores are below 1.80 which indicate the company has a very high
probability of bankruptcy.
The Altman Z-scores have decreased from 2004 to 2005 which indicates the company's
bankruptcy risk has increased.

Check

Next

http://platform2.mybusinesscourse.com/mod/quiz/attempt.php?attempt=54555&page=5&scrollpos=0

Page 3 of 3