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Analysis of Investments
Difficulty: Advanced
Investment Accounting Policy
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 equity securities at fair value with subsequent changes in fair value recognized in net earnings. General Dynamics reports the available-for-sale debt securities at fair value with unrealized gains and losses recognized as a component of other comprehensive income in the Consolidated Statement of Comprehensive Income. General Dynamics had no trading or held-to-maturity debt securities on December 31, 2018 or 2017.
Source: 10-K (filing date: 2019-02-13).
Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
General Dynamics Corp., adjustment to Net Earnings
USD $ in millions
| 12 months ended | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | |
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| Add: Unrealized gains (losses) on marketable securities | |
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| Net earnings (adjusted) | |
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Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).
Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)
General Dynamics Corp., adjusted ratios
Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).
| 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 improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by shareholders’ equity. | General Dynamics Corp.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by total assets. | General Dynamics Corp.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018. |
General Dynamics Corp., Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).
2018 Calculations
1 Net profit margin = 100 × Net earnings ÷ Revenue
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Revenue
= 100 × ÷ =
| 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 improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).
2018 Calculations
1 ROE = 100 × Net earnings ÷ Shareholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net earnings ÷ Shareholders’ equity
= 100 × ÷ =
| 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 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09).
2018 Calculations
1 ROA = 100 × Net earnings ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net earnings ÷ Total assets
= 100 × ÷ =
| 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 2016 to 2017 and from 2017 to 2018. |