Essay Example: The Importance of the Cash Flow Statement (Lockheed Martin)

By the first quarter of the 2020 financial year, Lockheed Martin Corporation had $ 1,988,000,000 in cash and cash equivalents (Lockheed, 2020b). This amount is compared to $ 1,514,000,000 held by the company at the end of the last financial year, ending on 31st December 2019 (Lockheed, 2020a). The following discussion explains in detail the change in the cash balance for Lockheed Martin Company in the intervening period, as well as more information on the most significant cash activities that generated the said results. For closure, this current writing will offer possible recommendations to lending facilities regarding the financial position of the company based on the analysis of the company’s cash flow statement.

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In three months, Lockheed has managed to increase its cash balance by $ 474,000,000, a considerable amount given that the value represents more than twenty percent of the gross cash balance at the end of 2019. This difference also represents a more than 200% increase in the percentage change in cash and cash equivalents at the close of the financial year 31st December 2019. The management of the company attributes a significant portion of this success to the business’s net sales on the delivery of products. The services provided by the company record a smaller margin of the net cash and cash equivalents.

The most significant cash inflow to the company is normal operating activities, which include the company’s core business (provision of products and services in the aerospace industry). By these calculations, especially noted, are the net sales from aeronautics products that contributed the most significant value to Lockheed Martin’s cash balance. However, though the cost of production is relatively high, this factor does not hinder the company from maintaining desirable results to the extent of offering shareholders a $ 6.08 dividend per common share of the company (Lockheed, 2020b). These earnings were evident from the latest company results, recording an increase from the 2019 accounts that posted $ 5.99 per share at the end of the financial year.

Going by these results, the company portrays the capability to generate almost similar results to last year’s or surpass the mark. Thus, it is viable for any lender to advance credit to Lockheed Martin based on a measurable repayment framework to safeguard the interest of both institutions. The more reason to do that is that the company generates almost double its cash balance every year.

Reference

Lockheed Martin Corporation (2020a). 2020 10-Q Form. Retrieved from https://www.sec.gov/ix?doc=/Archives/edgar/data/936468/000093646820000056/lmtq1202010q.htm#s869B7F1D8EC954EFBAE9052F11D59961

Lockheed Martin Corporation (2020b). 2019 10-K Form. Retrieved from https://www.sec.gov/ix?doc=/Archives/edgar/data/936468/000093646820000016/lmtq4201910k.htm#sDE1861BCE6795E5A8FF097080E42EFBA