Reference no: EM133328368
Case: The course project required that you develop your own financial analysis and financial models using primarily the 10-K for your company. All financial models were required to be original and to reflect your own work.
Discuss your process for developing your financial models in detail. How did you decide on format? What sources did you use to ensure that your model was crafted in a logical manner? What sources were most helpful to you? Discuss your work on the Beneish Model. How did you make your model and what sources were most helpful to you in learning about the model? What did you learn about the significance of each component of this model? For each component, discuss why each would be considered in the evaluation of financial manipulation? What do each of them represent, specifically? Theoretically, how does each component contribute to the conclusion as to whether there is financial manipulation or not?
ANALYSIS:
Raytheon Company has continued to develop integrated and advanced technological products, services, and solutions in various sectors and fields, such as cybersecurity, computing, sensors, intelligence systems, and command and control systems. The company has come up with technological advancements to address some of the challenges experienced in the world by coming up with spearheading innovations and advancements in the field of aviation, defense, and space. Raytheon has a reliable supplier base, which helps the company build a solid relationship with them for them to be able to work collaboratively in developing top-notch technologies while taking away the production and maintenance cost of the products (Monteiro, 2022).
According to Monteiro (2022), Raytheon Company products demands have continued to grow with customers, including the government of the United States and various global customers. The increased demand has led to an increase in the company's revenue with aviation, specifically Boeing and Airbus companies which have increased their output which has shown to increase in demand for the engines being produced by Raytheon companies. The company's main asset includes free cash flow obtained through its long-term standing contract with the U.S. government. Therefore, the company's current assets have constantly been growing due to the increase in income as the company seeks to find a stable ground regarding the balance between the total and the long-term assets. Through the stable cash flow, the company has acquired resources that have enabled it to penetrate global markets.
Raytheon Company has made significant advancements in the aviation and defense sector by providing advanced systems that can be used by commercial, government, and militaries worldwide. The company can operate in various business categories, such as Integrated Defense Systems; Intelligence, Information, and Services; Missile Systems; Space and Airborne Systems; and Force points. Integrated Defense Systems (IDS) and its headquarters are in Tewkesbury, Massachusetts. However, the IDS can provide solutions to U.S. intelligence and the Department of Defense. The company boasts products and services to more than 50 clients worldwide. The IIS provides technological products and services in the defense and commercial sectors. It develops equipment for internet security, automated solutions, surveillance, and domestic and international air traffic management (Peter, 2021).
According to Raytheon Company (2022), some risk factors that the company faces include overreliance on the U.S. government. This is because the company may experience various fluctuations in the government defense priorities, which may have negative consequences on the financial health of the company. The spending trends tend to be unpredictable; hence, anything can happen to the company, e.g., termination or reduced spending on contracts.
The company also faces a threat to continue producing new technological advancements to continue in business. Hence if the company stops production or making innovations, it is more likely to collapse due to reduced demand for its products. Competition within the technological market is stiff, and therefore Raytheon technologies ought to keep up with the pace in the industry. Raytheon faces the risk of cyber-attacks and other security infringements, which would damage the company's reputation. These attacks jeopardize the business standings and customer trust and open up both financial and legal problems for the company, leading to reduced demand for products, loss of customers, and a reduction in the company's profits. As a result of the company's overreliance on employee retention and hiring of qualified employees, the company faces the risk of failure if it retains its workforce since it may affect the day-to-day operations due to being understaffed. Raytheon makes most of its decisions based on approximations, and making estimates can negatively affect the company. The company faces the risk of losing control of its acquisitions, mergers, diversities, and other transactions that can effectively ruin its financial future.
Raytheon technologies make use of indicators that are aimed at anticipating future trends. The company used trend analysis when analyzing the percentage of international sales. The percentage of global sales increased every year from 27% to 31% between 2013- 2015. In addition to the indicators, the company also looks into various factors that may affect its future, including identifying the current opportunities for growth in the new and emerging technology market (Raytheon Company, 2022). The COVID-19 pandemic negatively impacted the air travel sector since people were not allowed to move freely from one place to another. This resulted in more than 8,000 employees being laid off since the commercial aviation sector had to be shut down for a while due to travel slowdown.
It is evident from the analytical study of Raytheon technologies that the company can compete with various defense and aerospace companies. This is because the company has been successful over the years since its financial statements indicate that it has solid financial anchorage and the potential to continue growing and growing. Moreover, the company has specialized in the manufacture of various products in aviation, defense, and space, thus delivering top-notch products across different markets and economies worldwide (Peter, 2021)
The analysis of the various variables such as the Days Sales in Receivables Index (DSRI), Gross Margin Index (GMI), Asset Quality Index (AQI), Sales Growth Index (SGI), Depreciation Index (DEPI), Sales, General, and administrative expenses Index (SGAI). The financial statements of Raytheon are eye-catching to investors since it is evident that the company has an excellent financial standing. Therefore, any investor would feel safe investing with Raytheon since the company is performing well and has a future in the defense, aviation, and space technologies markets (Welc, 2020).
The analysis of the various financial ratios of Raytheon, including Quick Ratio, Debt-Equity Ratio, Profit margin, Return on equity Ratio (ROE), and Return on Assets, have been able to indicate that the company has the capability of clearing off both their short and long term liabilities. The financial ratios have shown that the company is making profits since its sales in aviation, defense, and space technologies are increasing, thus making it financially healthy (Welc, 2020).
It is evident from this analysis that Raytheon is a long-standing corporation with a strong track record in the military electronics and aerospace industries. It is financially stable and actively increasing its business across the world. Over the years, the firm has built its reputation and market share via innovative product development and aggressive marketing. The numbers indicate a solid business regarding liquidity, profitability, and efficiency. Short-term and long-term debts may be met easily (Welc, 2020). Financially, the firm is doing well, and good tendencies can be seen in both horizontal and vertical dimensions.
Raytheon plays a critical role in the aviation and defense industry, and it faces competition from some of the industry's big players, including Boeing and Lockheed Martin. The company is performing well based on the analysis of its financial indicators, thereby giving it the capability of competing with the big leagues regarding competitive advantage.