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Introduction
As a global defense and technology company with a market capitalization of US$22.6 billion, Northrop Grumman Corporation (NYSE: NOC) has 122,600 employees who provide innovative systems, products, and solutions in information and services, electronics, aerospace and shipbuilding to government and commercial customers worldwide. Last year, the company generated $32 billion revenue and has a net income of $1.79 billion.
Main Products and Services
Information & Services; Electronics; Aerospace; Shipbuilding.
Other Important Facts
Major competitors: Lockheed Martin Corporation, Boeing Company, Raytheon Company, General Dynamics Corporation and United Technologies Corporation.
Main customer: among the $32 billion revenue in year 2007, $28.7 billion (or 90%) were generated from business with United State Government.
SWOT Analysis
(See Appendix for detail explanations)
Strengths
Diversified business portfolio
Solid financial performance
Solid customer relationship
Weaknesses
Weak performance in some business divisions
Overdependence on the US
Overdependence on single customer
Opportunities
Large US aerospace and defense demand
Major contractor
Growing global aerospace and defense demand
Threats
Intense competition
Slowdown of the US and global economy
Risk and Risk Management
Gearing Risk
For Northrop Grumman, the shareholders need not worry about the risks relating to over leveraging, as the gearing ratio is low at 22.15%, although this may also implies insufficient use of financial leverage potential.
Liquidity Risk
1. Current ratio
The current ratios indicate that the liquidity of Northrop Grumman in 2007 is at 1.053, which is better than that in 2006, which is 0.996.
However, ideally, this ratio should be at least 2/1 or greater. If it is...