Date of Award
Master of Science
Department of Systems Engineering and Management
Clay M. Koschnick, PhD
Financial ratio analysis has long been used to determine the financial health of firms and project business performance. Despite the usefulness of financial ratio analysis, risk analysis in defense acquisitions largely ignores these indicators of company financial well-being. This research performs contingency table statistical analysis to determine if a relationship exists between company financial ratios and their future cost performance on Air Force contracts. The general findings are that poor financial ratios at the time of contract start are related to increased likelihood of cost overruns on that contract. Specifically, recent trends of a company’s current ratio in comparison to the long-term average current ratio of that company are especially linked with the Cost Performance Index (CPI). The results of this research justify further exploration into financial ratio analysis of offering companies as a means to better assess the cost overrun risk of DoD programs.
DTIC Accession Number
Weaver, Brady C., "The Effect of Company Financial Health on the Likelihood of Cost Overruns" (2022). Theses and Dissertations. 5428.