Financial Analysis of Northrop Grumman
Embrry-Riddle Aeronautical University
MBAA 518 Managerial Finance
December 16, 2012
The fiscal analysis of Northrop Grumman includes the examination of profitability, liquidity, and equity ratios, its 3 year stock price, as well as a general financial overview of the company. This case study exams their fiscal strategy as well as the debt utilization and possible effects of the fiscal crisis on Northrop Grumman. This document compares Northrop Grumman to other companies in the defense sector by comparing their ratios as well profitability. The paper will provide the reader with an understanding of the financial makeup of the company and its current and recent performance as well as estimates of future earnings.
Overview of Northrop Grumman
Northrop Grumman is one of the world’s major defense contractors. Northrop Grumman is an innovative company that has long history of making aircraft and other products that support the defense industry. Northrop Grumman is made up of the former Northrop and Grumman companies and eighteen other companies that have been integrated into one successful corporation. Northrop Grumman has four primary sectors in its business model: aerospace systems, electronic systems, information systems, and technical services. The company has its headquarters in Falls Church, Virginia, and production facilities across the United States, with major facilities in California, Virginia, and Maryland. Northrop Grumman is the third largest defense contractor in the world. Some of Northrop Grumman’s primary competitors are Lockheed Martin, Raytheon, Boeing, and L-3 Communications Holdings, Inc. Northrop Grumman plans on remaining competitive even with the threat of sequestration looming over the federal government and the threat of an additional $500 Billion in defense cuts above the currently planned $500 billion in defense cuts. They plan on remaining competitive by being able to successfully develop and market their products, to stay ahead of the competition. This is done by reaming innovative, and providing the facilities and people to accomplish these goals of developing and manufacturing new products and support businesses and governments in information technology. History of Northrop Grumman
Northrop was founded in 1939 by Jack Northrop in Hawthorne, California. The company produced its first aircraft in 1940, the N-3PB patrol bomber for the Norwegian Air Force. The first production aircraft for the United States Army Air Force was the P-61 Black Widow. They continued developing aircraft for the United States Air Force, competing in the bomber contract in the mid-1940s for the long range heavy bomber contracts using his radical flying wing designs of the XB-35 and XB-49, which were in competition with the B-36 and B-47. This was a highlight of Jack Northrop’s development of technologically advanced aircraft. In 1959, they had the first flight of the F-5 a supersonic low cost fighter that would serve as the basis of the T-38 supersonic jet trainer for the USAF, and later on the F-20 an upgraded version of the F-5. They also designed the US first ICBM the Shark. They continued with development of many programs culminating with the B-2 Spirit Stealth Bomber, currently the most advanced and expensive bomber ever built for the US Air Force. In 1994 they acquired the Grumman Corporation and became Northrop Grumman.
The Grumman Corporation started out in the 1930 was instrumental in the development of Naval Aircraft. They built the XFF-1, built in 1931, was the first naval aircraft with retractable landing gear. The built the widely successfully naval fighters the Wildcat with the first ever sto-wing and the Hellcat one of the most successfully carrier aircraft of World War Two. Grumman continued to develop aircraft for the United States Navy, developing the F9F Panther, one of the United States Navy’s earliest jet...
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