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Business & Marketing
Case Study
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CASE STUDY IV (Case Study Sample)

FINC_FINAL_PROJECT._INSTRUCTION.doc Project Descriptions Authentic Assessment Project The course project is designed to synthesize your financial studies into a comprehensive real life case study. The main task is to identify an industry (or market sector) and then research the industry to identify the leading companies in the industry, analyze their finances and provide an your own analyst's opinion on the prospects for the industry and to identify which companies are best positioned to lead that industry. Industry identified: The Defense Industry According to Defense, the top 5 US Defense companies are: - #1 Lockheed Martin Corporation - $11,904M revenue in 2009 - #2 Northrop Grumman Corporation - $9,324M revenue in 2009 - #3 Boeing Corporation - $8,189M revenue in 2009 - #4 Raytheon Corporation - $6,187 revenue in 2009 - #5 General Dynamics Corporation - $4,730 revenue in 2009 Defense Systems, 2010 QUESTION: Analyze the following elements of these major competitors: [It is expected that you will discuss why you selected the measures used, interpret the data and explain what this information suggests about the company's financial situation and future financing needs.] a) Each company's capital structure b) Cost of capital, capital structure, CAPM, cash flow, value of common stock and MVA. Your research should include a survey of business periodicals, industry data from established sources, analyst reports, news articles and journals as appropriate. APA style criteria required. source..
Running Head: CASE STUDY
Case Study
Lockheed Martin Corporation is viewed as the market leader in the Aerospace and Defense industry especially on the strength of its revenue. It operates a capital structure that is almost equally split between debt and equity with a debt-to-total-capital ratio of 55%. Over the past year Lockheed Martin has experienced a consistent albeit minimal reduction in the return on invested capital – 21.4%, 21.7% and 19.9% in 2007, 2008 and 2009 respectively. This could be associated with the overall contraction of the economy resulting in reduced earnings as a result of increased cost of doing business. Its cash flow position has seen a reversal of trend from what was reported in the year 2008 as a result of the increase in the financing cash flow (Hodder, Hopkins & Wood, 2008). This positive effect was possible as a result of issuance of a new debt that resulted in a positive net change in cash. Overall, Lockheed Martin has seen its share price fluctuate in the past year from a starting point of $75.36, reaching a high of $86.92 before registering a steady decline to the present position of $68.55. The market value added (MVA) of Lockheed Martin currently stands at $20 billion.
Northrop Grumman Corporation is the second placed player in the Aerospace and defense industry measured as denoted by sales. In 2009, it had sales of $9.3 billion dollars. It operates a capital structure that is more equity than debt. This is evident by it having debt-to-total-equity ratio of 31.90%. This has the effect of allowing Northrop Grumman Corporation to easily position itself to take advantage of emerging knowhow as a result of the high equity in addition to allowing it to take on more debt equity should the need arise. In the past year, Northrop Grumman has witnessed a return of invested capital of 15.34%. This is a positive figure especially if viewed in light of global financial crisis which has resulted in the contraction of markets which has resulted in an increase in the price of doing business. However it is still a positive increase from the previous year. The cash flow position has seen a positive growth especially investing cash flow which has risen to positive returns from negative returns the previous year. This coupled with the increase in the financing cash flow has resulted in a positive cash change despite there cash flow from operation activities witnessing a marked reduction. Overall, Northrop Grumman Corporation has witnessed it share price fluctuate from $7.62 to the present value of $63.20 having achieved a high of $69.38. The market value added of Northrop Grumman Corporation currently stands at $6 billion.
Boeing Corporation is occupies position three in the aerospace and defense indu...
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