However, remember that defense contracting is a
very capital intensive industry, which means that to truly get a sense for how strong GD's balance is we need to compare to its peers.
Integrated electric utilities were an
extremely capital intensive industry (before the 1990's growth of Independent Power Producers), where a company had to incur capital expenditures of $ 5 to $ 7 to produce $ 1 of annual revenue.
The second major protective factor is the strong balance sheet, a major advantage in a
highly capital intensive industry that requires lots of specialized equipment.
While the company operates in a highly
capital intensive industry, the nature of its military and government contracts also locks in relatively high profitability, resulting in cyclical but relatively stable and generous profits and returns on shareholder capital.