Lockheed Martin Corporation (LMT)

Based on the provided data, let us analyze the liquidity ratios of Lockheed Martin Corporation:

1. Current Ratio:
- The current ratio indicates the company's ability to meet its short-term liabilities with its short-term assets.
- Lockheed Martin's current ratio has shown a slight fluctuation over the years, starting at 1.39 in 2020 and increasing to 1.42 in 2021. However, there was a subsequent decline to 1.13 by the end of 2024.
- Generally, a current ratio above 1 indicates that Lockheed Martin has more current assets than current liabilities, which is considered a good sign for short-term financial health.

2. Quick Ratio:
- The quick ratio provides a stricter measure of liquidity as it excludes inventory from current assets.
- Lockheed Martin's quick ratio has also fluctuated over the years, ranging from 0.13 to 0.26.
- A quick ratio of less than 1 may suggest potential difficulty in meeting short-term obligations without relying on the sale of inventory, which is a consideration for the company's liquidity position.

3. Cash Ratio:
- The cash ratio is the most conservative liquidity ratio, measuring the company's ability to cover its short-term liabilities with its cash and cash equivalents.
- Lockheed Martin's cash ratio has displayed similar fluctuations to the quick ratio.
- A cash ratio of 0.13 to 0.26 indicates that Lockheed Martin may have a limited amount of cash and cash equivalents relative to its short-term liabilities, which could impact its ability to cover immediate obligations.

In conclusion, while Lockheed Martin Corporation's current ratio has remained above 1, suggesting a good ability to cover short-term obligations, the decreasing trend in both the quick and cash ratios over the years raises some concerns about the company's liquidity position and the need for closer monitoring of its cash management practices and potential short-term liquidity risks.

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See also:

Lockheed Martin Corporation Liquidity Ratios

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Additional liquidity measure

Lockheed Martin Corporation's cash conversion cycle has shown a downward trend over the years from 2020 to 2024. In 2020, the cash conversion cycle was 22.80 days, which decreased to 18.77 days in 2021, further to 19.54 days in 2022, and then to 19.35 days in 2023. However, there was a slight increase in the cash conversion cycle to 19.78 days in 2024.

A decreasing cash conversion cycle indicates that the company is more efficient in managing its working capital, as it takes fewer days to convert its investments in inventory and accounts receivable into cash. This could be a positive sign of effective inventory management and collections practices, which may contribute to improved liquidity and operational efficiency for Lockheed Martin Corporation during the period analyzed.