Microsoft Excel LibreOffice Calc

Lockheed Martin Corp. (LMT)


Financial Reporting Quality: Aggregate Accruals

High level of difficulty

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.


Balance-Sheet-Based Accruals Ratio

Lockheed Martin Corp., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Operating Assets
Total assets 44,876  46,521  47,806  49,128  37,073 
Less: Cash and cash equivalents 772  2,861  1,837  1,090  1,446 
Operating assets 44,104  43,660  45,969  48,038  35,627 
Operating Liabilities
Total liabilities 43,427  47,130  46,200  46,031  33,673 
Less: Current maturities of long-term debt and commercial paper 1,500  750  —  956  — 
Less: Long-term debt, net, excluding current maturities 12,604  13,513  14,282  14,305  6,169 
Operating liabilities 29,323  32,867  31,918  30,770  27,504 
Net operating assets1 14,781  10,793  14,051  17,268  8,123 
Balance-sheet-based aggregate accruals2 3,988  (3,258) (3,217) 9,145 
Ratio
Balance-sheet-based accruals ratio3 31.19% -26.23% -20.54% 72.03%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Boeing Co. 114.97% 63.07% -137.37% -10.11%
General Dynamics Corp. 60.37% -0.77% 9.87% 0.00%
Northrop Grumman Corp. 61.81% 12.46% 0.60% 4.51%
Raytheon Co. 9.47% -2.62% -2.91% 21.45%
United Technologies Corp. 46.18% 7.98% 8.80% -11.04%
Balance-Sheet-Based Accruals Ratio, Sector
Aerospace & Defense 46.91% 2.27% -2.03% 7.04%
Balance-Sheet-Based Accruals Ratio, Industry
Industrials 4.94% 8.49% -15.11% -22.63%

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

1 2018 Calculation
Net operating assets = Operating assets – Operating liabilities
= 44,10429,323 = 14,781

2 2018 Calculation
Balance-sheet-based aggregate accruals = Net operating assets 2018 – Net operating assets 2017
= 14,78110,793 = 3,988

3 2018 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 3,988 ÷ [(14,781 + 10,793) ÷ 2] = 31.19%

4 Click competitor name to see calculations.

Ratio Description The company
Balance-sheet-based accruals ratio Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. Using the balance-sheet-based accruals ratio, Lockheed Martin Corp. deteriorated earnings quality from 2017 to 2018.

Cash-Flow-Statement-Based Accruals Ratio

Lockheed Martin Corp., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net earnings 5,046  2,002  5,302  3,605  3,614 
Less: Net cash provided by operating activities 3,138  6,476  5,189  5,101  3,866 
Less: Net cash used for investing activities (1,075) (1,147) (985) (9,734) (1,723)
Cash-flow-statement-based aggregate accruals 2,983  (3,327) 1,098  8,238  1,471 
Ratio
Cash-flow-statement-based accruals ratio1 23.33% -26.78% 7.01% 64.89%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Boeing Co. -6.67% -264.01% -87.06% -51.58%
General Dynamics Corp. 58.57% -1.41% 9.91% 2.34%
Northrop Grumman Corp. 51.59% 2.79% 1.97% 2.72%
Raytheon Co. 0.02% 0.77% -5.49% 12.72%
United Technologies Corp. 24.46% 4.03% 2.60% 7.67%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Aerospace & Defense 29.18% -4.40% 0.73% 12.00%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials 0.53% -2.18% -8.32% -6.18%

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-09).

1 2018 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 2,983 ÷ [(14,781 + 10,793) ÷ 2] = 23.33%

2 Click competitor name to see calculations.

Ratio Description The company
Cash-flow-statement-based accruals ratio Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. Using the cash-flow-statement-based accruals ratio, Lockheed Martin Corp. improved earnings quality from 2017 to 2018.