Lockheed Martin Corp. (NYSE:LMT)

Current Ratio

The current ratio exhibits a downward trend over the period from 1.39 in 2020 to 1.13 in 2024. This indicates a gradual decrease in the company's ability to cover its short-term liabilities with its short-term assets. The decline suggests a potential tightening in liquidity, although the ratio remains above 1.0, implying that current assets still exceed current liabilities.

Quick Ratio

The quick ratio follows a similar decreasing pattern from 1.05 in 2020 to 0.92 in 2024. Notably, there is a slight increase seen in 2021 before the downward trend resumes. The drop below 1.0 in the last two years signals that the company might be relying on inventory or less liquid current assets to meet short-term obligations, potentially indicating reduced immediate liquidity.

Cash Ratio

The cash ratio shows more volatility and a pronounced decline from 0.23 in 2020 to a low of 0.09 in 2023, with a minor recovery to 0.13 in 2024. This metric, which measures the company's ability to cover current liabilities with cash and cash equivalents, suggests significantly reduced cash reserves relative to short-term liabilities in recent years, highlighting tighter cash management or increased operational cash usage.

The analysis of the financial data reveals several notable trends concerning liquidity and short-term financial management.

Current Assets

Current assets show a general upward trend over the observed period, increasing from $19,378 million in 2020 to $21,849 million by 2024. This gradual increase indicates a consistent accumulation of assets expected to be liquidated or converted into cash within a year.

Current Liabilities

Current liabilities have increased at a faster rate compared to current assets. From $13,933 million in 2020, current liabilities rose steadily to reach $19,420 million in 2024. This substantial rise suggests an increasing burden of short-term obligations over the years.

Current Ratio

The current ratio, which measures the ability to cover short-term liabilities with short-term assets, has shown a declining trend. Starting at a ratio of 1.39 in 2020, it decreased progressively to 1.13 by 2024. Despite remaining above 1, indicating that current assets still exceed current liabilities, the consistent downward movement points to weakening short-term liquidity.

Overall, the data indicates that while current assets have grown, current liabilities have expanded more rapidly. This imbalance has resulted in a declining current ratio, which may warrant attention to ensure sufficient liquidity and to manage any potential risks related to short-term financial stability.

Overview of Quick Assets and Current Liabilities

The total quick assets have shown a generally positive trend over the five-year period. Starting at $14,683 million in 2020, the amount increased steadily to $17,791 million by 2024, reflecting a growth in liquid assets.

In contrast, current liabilities also increased significantly over the same period, rising from $13,933 million in 2020 to $19,420 million in 2024. This indicates a substantial rise in short-term obligations.

Quick Ratio Trends

The quick ratio experienced fluctuations, beginning at 1.05 in 2020 and peaking at 1.15 in 2021. However, it declined thereafter, dropping below 1.0 in 2023 to 0.99 and further decreasing to 0.92 in 2024. This downward trend suggests a weakening short-term liquidity position over time.

Interpretation and Insights

While the company’s quick assets increased consistently, the growth in current liabilities outpaced that of quick assets, resulting in a declining quick ratio. A quick ratio below 1.0 in the latest recorded years may imply potential challenges in covering current liabilities with the most liquid assets.

This pattern of rising liabilities alongside a less pronounced increase in quick assets warrants attention, as it could impact the company's ability to meet short-term obligations without relying on inventory or other less liquid assets.

Total cash assets

The total cash assets show a fluctuating trend over the observed periods. Initially, there was an increase from 3,160 million USD at the end of 2020 to 3,604 million USD in 2021. This was followed by a significant decline to 2,547 million USD in 2022 and a further drop to 1,442 million USD in 2023. However, cash assets rebounded to 2,483 million USD in 2024, indicating some recovery after the previous decreases.

Current liabilities

Current liabilities exhibit a steady upward trend throughout the period. Starting at 13,933 million USD in 2020, liabilities gradually increased each year, reaching 19,420 million USD by the end of 2024. This consistent rise suggests growing short-term obligations.

Cash ratio

The cash ratio has declined notably over the five years. The ratio was 0.23 in 2020, slightly improving to 0.26 in 2021, but then sharply decreased to 0.16 in 2022 and further to 0.09 in 2023. A partial recovery occurred in 2024 with the ratio rising to 0.13. Despite this uptick, the ratio remains well below the levels seen at the beginning of the period, reflecting a reduced ability to cover current liabilities with cash assets.

Overall analysis

Overall, there is a visible reduction in liquidity as indicated by the cash ratio and declining cash assets, especially from 2021 to 2023. Concurrently, current liabilities have increased consistently, which may indicate rising short-term financial pressure. The partial recovery in cash assets and the cash ratio in 2024 may suggest efforts to improve liquidity, but the ratio remains relatively low, implying cautious monitoring is warranted regarding the short-term financial stability.