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Microsoft Excel LibreOffice Calc


Analysis of Investments

Difficulty: Advanced


Investment Accounting Policy

Cash and Equivalents and Investments in Debt and Equity Securities

General Dynamics considers securities with a maturity of three months or less to be cash equivalents. General Dynamics' cash balances are invested primarily in time deposits rated A-/A3 or higher. General Dynamics' investments in other securities are included in other current and noncurrent assets on the Consolidated Balance Sheet. General Dynamics reports the held-to-maturity securities at amortized cost. General Dynamics reports the available-for-sale securities at fair value. Changes in the fair value of available-for-sale securities are recognized as a component of other comprehensive income (loss) in the Consolidated Statement of Comprehensive Income. General Dynamics had no trading securities on December 31, 2017 or 2016.

Cash flows in 2016 and 2015 were affected negatively by growth in operating working capital in General Dynamics' Combat Systems group due to the utilization of deposits and the timing of billings on a large contract for a Middle Eastern customer, and in the Aerospace group from the build-up of inventory related to the new G500 and G600 aircraft programs and the liquidation of customer deposits associated with aircraft deliveries. In 2017, the growth in operating working capital due to these factors slowed and was offset by lower income tax payments.

Source: General Dynamics Corp., Annual Report


Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

General Dynamics Corp., adjustment to Net Earnings

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net earnings (as reported) hidden hidden hidden hidden hidden
Add: Unrealized gains (losses) on securities hidden hidden hidden hidden hidden
Net earnings (adjusted) hidden hidden hidden hidden hidden

Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

General Dynamics Corp., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net Profit Margin
Reported net profit margin hidden% hidden% hidden% hidden% hidden%
Adjusted net profit margin hidden% hidden% hidden% hidden% hidden%
Return on Equity (ROE)
Reported ROE hidden% hidden% hidden% hidden% hidden%
Adjusted ROE hidden% hidden% hidden% hidden% hidden%
Return on Assets (ROA)
Reported ROA hidden% hidden% hidden% hidden% hidden%
Adjusted ROA hidden% hidden% hidden% hidden% hidden%
Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. General Dynamics Corp.'s adjusted net profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders' equity. General Dynamics Corp.'s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. General Dynamics Corp.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net earnings (USD $ in millions) hidden hidden hidden hidden hidden
Revenue (USD $ in millions) hidden hidden hidden hidden hidden
Net profit margin1 hidden% hidden% hidden% hidden% hidden%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings (USD $ in millions) hidden hidden hidden hidden hidden
Revenue (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted net profit margin2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 Net profit margin = 100 × Net earnings ÷ Revenue
= 100 × hidden ÷ hidden = hidden%

2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Revenue
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. General Dynamics Corp.'s adjusted net profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net earnings (USD $ in millions) hidden hidden hidden hidden hidden
Shareholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
ROE1 hidden% hidden% hidden% hidden% hidden%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings (USD $ in millions) hidden hidden hidden hidden hidden
Shareholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted ROE2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROE = 100 × Net earnings ÷ Shareholders' equity
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROE = 100 × Adjusted net earnings ÷ Shareholders' equity
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders' equity. General Dynamics Corp.'s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net earnings (USD $ in millions) hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
ROA1 hidden% hidden% hidden% hidden% hidden%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings (USD $ in millions) hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted ROA2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROA = 100 × Net earnings ÷ Total assets
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROA = 100 × Adjusted net earnings ÷ Total assets
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. General Dynamics Corp.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.