Assignment 3 Financial Statement Analysis Individual Project : Northrop Grumman Corporation The Northrop Grumman Corporation is the fifth largest defense contractor in the world as of 2015. The company has a global presence in the fields of aerospace and defense; it is one of the largest producers of combat planes for the US Army. The company is headquartered in West Falls Church, Virginia and employs over 64000 people worldwide. As of 2014 Northrop Grumman is a solid US corporation, it has strong financials and positive growth prospects. In terms of liquidity, we feel that the company is more than able to finance its commitments. The company’s current and acid test and inventory ratios have declined from a peak in 2013. The shortfall has …show more content…
This has put pressure on the company’s liquidity. However the company can still more than pay its way as all ratios are well in excess of 1. In terms of profitability the company has improved from 2013, the profit margin improved from 7.9 percent to 8.6 percent. This is an important accomplishment, mainly due to a large fall in the cost of services that the company provides. On the other hand the company’s asset turnover ratio underperformed in 2014, falling from 93 percent to 90 percent. An important contributing factor in this decline was a fall in the total sales from a peak of 24661 million in 2013 to 23979 million in 2014. The fall happened mainly because of the sequester in the US military, which was forced to cut back on some purchases as a result. I note that the numbers are still exceedingly positive concerning asset turnover; the company makes solid use of its assets. The return on assets improved year on year, by around 3 percent. An important factor in this improvement is the large share-repurchase program that the company has maintained in recent years; in 2013 the company repurchased 27 out 239 million shares. This has improved yields on the shares still on the market. The return on common …show more content…
If successful the lawsuit could seriously harm the company, by depriving it of a very important source of revenue. More generally the company suffers from an over-reliance on a single customer (the US Military). This is good when military spending goes up, but can be very damaging when it falls. This was illustrated in 2013 with the company’s fall in total sales. Also the company faces intense competition from both domestic and foreign rivals. The imminent closure of the Import-Export bank, an important source of cheap funding, is likely to increase these