General Dynamics Financial Model
Aerospace and Defence Company Financials Example (Free Excel Download)
General Dynamics is a global aerospace and defence company that provides business aviation, ship construction and repair, land combat vehicles, weapons systems, and technology products.
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About this model
This model projects General Dynamics' consolidated earnings, cash flow, and valuation by forecasting its four distinct business segments based on defence budget appropriations, backlog conversion rates, and business jet demand, enabling an equity analyst to determine a target price and assess dividend sustainability.
General Dynamics is a global aerospace and defence company that provides business aviation, ship construction and repair, land combat vehicles, weapons systems, and technology products. The company operates as a prime contractor to the US Department of Defense and allied nations, while also serving the commercial aviation market through its Gulfstream subsidiary.
Business segments include:
- Marine Systems (approx. 32% of revenue)
- Technologies (approx. 26% of revenue)
- Aerospace (approx. 25% of revenue)
- Combat Systems (approx. 17% of revenue)
The company operates primarily in the United States, which accounts for the vast majority of its revenue, though it has significant international sales in its Aerospace and Combat Systems (European Land Systems) divisions. The business model is a mix of asset-heavy manufacturing (shipyards, aircraft production facilities) and human-capital-intensive services (IT and mission systems). General Dynamics holds a dominant competitive position as one of the two primary builders of nuclear-powered submarines for the US Navy and a leading manufacturer of ultra-long-range business jets. Recent major events include the FAA certification and entry into service of the Gulfstream G700 in early 2024, driving a significant inflection in Aerospace revenue, and a massive 30% company-wide backlog growth in 2025 to $118 billion.
The downloadable General Dynamics financial model includes SEC-sourced historical financials, forecast assumptions, core operating schedules, and valuation outputs in an Excel workbook built for review and scenario analysis.
A turnkey financial model
Live formulas, no hardcoded values
Outputs are driven by live formulas, so the workbook updates from its assumptions instead of relying on hardcoded results.
All assumptions in one tab
Inputs are clearly marked in the Assumptions tab and separated from calculations, making it clear what to change and what to leave intact.
Statements always balancing
For integrated-statement models, the balance sheet, cash flow, and supporting schedules tie through properly.
Distinct schedules for clarity
Debt, working capital, taxes, and cash flow can get messy quickly. We group calculations in clear schedules, not across disconnected tabs.
No hidden macros or external links
There are no unexplained external workbook links or macros to undermine auditability or portability.
Changes flow through the model
Update a key driver and see the impact carry through the forecast, financing, and return outputs. We never use hardcoded numbers in formulas.
Historicals & AssumptionsGeneral Dynamics financial modelCompany, Historicals & Assumptions used
Source: SEC EDGAR · values in USD
| Line item | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue | $38.47B | $39.41B | $42.27B | $47.72B | $52.55B |
| Earnings before income tax | $3.87B | $4.04B | $3.98B | $4.54B | $5.10B |
| Operating income | $4.16B | $4.21B | $4.25B | $4.80B | $5.36B |
| Net income | $3.26B | $3.39B | $3.31B | $3.78B | $4.21B |
Forecast assumptions
Defaults used in the downloadable model. Forecast horizon: FY2026–FY2030.
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How to build a detailed financial model for General Dynamics
A complete walkthrough of every driver, margin, working-capital input, and capital-allocation assumption used in the downloadable model.
Revenue Deep Dive
Aerospace
- Segment name: Aerospace
- Revenue driver formula: (Aircraft Deliveries x Average Selling Price) + Aircraft Services Revenue
- Historical growth rate: 15% to 30% recently (driven by G700 certification and delivery ramp-up)
- Key growth levers and headwinds: Ramp-up of G700 and upcoming G800 deliveries, corporate jet demand, and high-net-worth wealth creation. Headwinds include supply chain bottlenecks and potential tariffs on aerospace components.
- Pricing dynamics: Highly contractual with significant pricing power for flagship large-cabin models.
- Revenue recognition notes: Aircraft manufacturing revenue is generally recognised at the point in time when the customer accepts the fully outfitted aircraft.
- Seasonality: Q4 is historically the strongest quarter for aircraft deliveries.
Marine Systems
- Segment name: Marine Systems
- Revenue driver formula: Beginning Funded Backlog x Backlog Conversion Rate
- Historical growth rate: 8% to 17% CAGR
- Key growth levers and headwinds: US Navy shipbuilding plans, specifically the Columbia-class ballistic missile submarine and Virginia-class attack submarine programmes. Headwinds include skilled labour shortages at shipyards.
- Pricing dynamics: Cost-plus and fixed-price incentive contracts with the US Government.
- Revenue recognition notes: Recognised over time using the percentage-of-completion method based on costs incurred relative to total estimated costs (cost-to-cost method).
- Seasonality: Relatively smooth throughout the year, driven by continuous shipyard production.
Combat Systems
- Segment name: Combat Systems
- Revenue driver formula: Contract Awards x Percentage of Completion
- Historical growth rate: 2% to 5% CAGR
- Key growth levers and headwinds: Global threat environment driving demand for Abrams tanks, Stryker vehicles, and artillery munitions. Headwinds include the termination of specific US military vehicle programmes (e.g., M10 Booker adjustments).
- Pricing dynamics: Regulated government pricing, often fixed-price contracts.
- Revenue recognition notes: Over time using the cost-to-cost percentage-of-completion method.
- Seasonality: Minimal seasonality; revenue follows production schedules and government funding cycles.
Technologies
- Segment name: Technologies
- Revenue driver formula: Billable Hours x Average Billing Rate + Hardware Sales
- Historical growth rate: 1% to 3% CAGR
- Key growth levers and headwinds: US federal IT modernisation, cloud migration, and cybersecurity spending. Headwinds include intense competition and contract protests delaying awards.
- Pricing dynamics: Mix of time-and-materials, cost-plus, and fixed-price contracts.
- Revenue recognition notes: Services recognised over time as services are rendered; hardware recognised upon delivery.
- Seasonality: Slight uptick in Q3/Q4 aligning with the end of the US Government fiscal year (September).
Cost Structure
Variable Costs / COGS
- Line-by-line breakdown: Operating costs and expenses (includes material, direct labour, subcontracts, and manufacturing overhead).
- Gross margin range: General Dynamics reports "Operating costs and expenses" rather than a traditional gross margin, but implied gross margins typically range from 15% to 18%.
- Key input costs and commodity exposures: Steel, titanium, aluminium, electronic components, and highly skilled unionised labour.
- How COGS scales with revenue: Linear for government segments due to cost-plus contracting; exhibits operating leverage in the Aerospace segment as production volumes increase.
Operating Expenses
- R&D: Typically 1% to 2% of consolidated revenue, but heavily concentrated in the Aerospace segment for new aircraft development. Company policy is to expense R&D as incurred, though some development costs are capitalised in inventory.
- SG&A: General and administrative expenses run at approximately 5% to 6% of revenue, covering corporate overhead, bidding and proposal costs, and Aerospace marketing.
- Depreciation & Amortisation: Approximately 1.5% to 2.0% of revenue, primarily related to shipyard infrastructure and aircraft manufacturing facilities.
- Stock-Based Compensation: Less than 0.5% of revenue, not a material driver compared to tech companies.
- Restructuring / one-time charges: Rare and typically immaterial.
Margin Profile
- Gross margin, EBITDA margin, operating margin, net margin: Operating margin ranges from 9.5% to 10.5% (10.2% in 2025). Net margin ranges from 7.5% to 8.5%.
- Margin trend: Stable to slightly expanding. Aerospace margins are expanding due to lower R&D post-G700 certification.
- Segment-level margins: Combat Systems (~14.1%), Aerospace (~13.3%), Technologies (~9.6%), Marine Systems (~7.0%).
Balance Sheet Structure
- Total assets: Approximately $50 billion to $55 billion.
- Key asset categories: Contract assets (unbilled receivables), Inventories (heavily weighted to Aerospace work-in-process), and Goodwill.
- Goodwill & intangibles as % of total assets: Approximately 40% to 45%, stemming from historical acquisitions like CSRA in the Technologies segment.
- Working capital profile:
- Days Sales Outstanding (DSO): 45 to 55 days.
- Days Inventory Outstanding (DIO): 60 to 80 days (skewed by Aerospace).
- Days Payable Outstanding (DPO): 40 to 50 days.
- Net working capital as % of revenue: Typically slightly positive but heavily influenced by government progress payments.
- Is working capital positive or negative? The company frequently operates with favourable working capital dynamics due to customer advances and progress payments (Contract Liabilities) funding inventory build-up.
- PP&E: Approximately $6 billion to $7 billion, consisting of shipyards, manufacturing plants, and service centres. Useful lives range from 10 to 40 years for buildings and 2 to 15 years for machinery.
- Right-of-use assets / operating leases: Approximately $1 billion to $1.5 billion, primarily for office space and service facilities.
Capital Expenditure & Investment
- Capex as % of revenue: 2.0% to 2.5% ($1.2 billion in 2025 on $52.6 billion revenue).
- Maintenance capex vs. growth capex: Roughly 40% maintenance, 60% growth. Growth capex is currently elevated to expand submarine production capacity at Electric Boat and munitions capacity.
- Major capex programmes underway or planned: Significant investments in shipyard infrastructure to support the Columbia-class submarine programme and expansion of Gulfstream service centres.
- Capitalised software / development costs if material: Not a material driver; aerospace R&D is largely expensed.
- M&A pattern: Historically a bolt-on acquirer in Technologies and Combat Systems, with occasional transformational deals (e.g., CSRA in 2018).
- Typical acquisition multiple paid: 10x to 13x EV/EBITDA for government IT and defence services peers.
Debt & Capital Structure
- Total debt and net debt: Total debt of approximately $8.0 billion; cash of $2.3 billion, resulting in net debt of $5.7 billion at year-end 2025.
- Debt/EBITDA ratio: Current gross leverage is approximately 1.3x to 1.5x, well within target ranges.
- Credit rating: A- (S&P) / A2 (Moody's), reflecting a strong investment-grade profile.
- Key debt instruments: Fixed-rate senior notes and a commercial paper programme backed by a revolving credit facility.
- Maturity profile: Well-laddered. The company expects to refinance $500 million of fixed-rate notes maturing in 2026.
- Interest rate profile: Predominantly fixed-rate debt with a weighted average cost of debt around 3.5% to 4.0%.
- Covenants: Standard investment-grade covenants; no material financial maintenance covenants that restrict operations.
- Share repurchase programme: Active. The company regularly returns excess cash to shareholders via buybacks to offset dilution and reduce share count.
- Dividend policy: Consistent dividend grower. Paid $1.6 billion in dividends in 2025. The current quarterly dividend is $1.59 per share.
Cash Flow Characteristics
- Operating cash flow conversion: Exceptionally strong. OCF was 122% of net earnings in 2025 ($5.1 billion OCF vs $4.2 billion net earnings).
- Free cash flow margin: FCF margin typically ranges from 7% to 9% of revenue.
- Major non-cash items that bridge net income to OCF: Depreciation and amortisation, deferred income taxes, and stock-based compensation.
- Working capital cash flow impact: Contract assets and customer advances (contract liabilities) create significant period-to-period volatility in OCF. Progress payments from the US Government act as a major source of cash during production ramp-ups.
- Capex intensity: Low to moderate (2.3% of revenue), allowing for high free cash flow conversion.
- Cash tax rate vs. GAAP effective tax rate: Cash taxes paid are often lower than the GAAP effective tax rate (approx. 16% to 17%) due to accelerated depreciation and R&D tax credits.
Sheet Structure
- Assumptions: Hardcoded drivers for macroeconomic inputs, segment growth rates, segment margins, tax rates, and capital allocation policies.
- Backlog & Orders: Roll-forward of company-wide and segment-level backlog (Beginning Backlog + Orders - Revenue Recognised = Ending Backlog).
- Revenue Build: Segment-level revenue projections (Aerospace, Marine Systems, Combat Systems, Technologies) driven by backlog conversion and aircraft delivery assumptions.
- Income Statement: Consolidated statement of earnings mirroring the 10-K (Revenue, Operating costs and expenses, General and administrative expenses, Operating earnings, Interest expense, Provision for income taxes, Net earnings).
- Balance Sheet: Assets (Cash, Accounts receivable, Contract assets, Inventories, PP&E, Goodwill), Liabilities (Accounts payable, Contract liabilities, Current portion of long-term debt, Long-term debt), and Shareholders' equity.
- Cash Flow Statement: Operating activities (Net earnings, D&A, changes in working capital), Investing activities (Capex), Financing activities (Dividends, Share repurchases, Debt issuance/repayment).
- Debt Schedule: Tranche-by-tranche roll-forward of senior notes, commercial paper, and interest expense calculation.
- Working Capital Schedule: Projections for receivables, inventory, payables, and contract assets/liabilities based on days outstanding metrics.
- DCF Valuation: Unlevered free cash flow calculation, WACC build, terminal value calculation, and implied share price.
Key Financial Relationships
- `Total Revenue = Aerospace Revenue + Marine Systems Revenue + Combat Systems Revenue + Technologies Revenue`
- `Aerospace Revenue = (Gulfstream Deliveries x Average Selling Price) + Jet Aviation Services Revenue`
- `Segment Operating Earnings = Segment Revenue x Segment Operating Margin`
- `Consolidated Operating Earnings = Sum of Segment Operating Earnings - Corporate Unallocated Expenses`
- `Book-to-Bill Ratio = Total Orders in Period / Total Revenue Recognised in Period`
- `Ending Backlog = Beginning Backlog + Total Orders - Total Revenue`
- `Estimated Potential Contract Value = Unfunded IDIQ Contracts + Unexercised Options`
- `Total Estimated Contract Value = Ending Backlog + Estimated Potential Contract Value`
- `Free Cash Flow = Cash Provided by Operating Activities - Capital Expenditures`
- `Interest Expense = Average Total Debt Balance x Weighted Average Interest Rate`
- `Effective Tax Rate = Provision for Income Taxes / Earnings Before Income Taxes`
- `Basic EPS = Net Earnings / Weighted Average Shares Outstanding`
- `Dividends Paid = Dividend Per Share x Shares Outstanding`
- `Ending Cash = Beginning Cash + Net Change in Cash from Cash Flow Statement`
Cross-Sheet Dependencies
- The Assumptions sheet feeds all primary drivers across the model.
- The Backlog & Orders sheet calculates revenue recognised, which directly feeds the top line of the Revenue Build and Income Statement.
- The Income Statement generates Net Earnings, which is the starting line item for the Cash Flow Statement and feeds Retained Earnings on the Balance Sheet.
- The Working Capital Schedule calculates changes in operating assets and liabilities, which feed the Operating Cash Flow section of the Cash Flow Statement.
- The Debt Schedule requires operating cash flow and capex from the Cash Flow Statement to determine cash available for debt paydown or required borrowing. The resulting debt balances feed the Balance Sheet, and the calculated interest expense feeds back into the Income Statement (creating a circular reference that must be managed with a toggle).
- The DCF Valuation pulls NOPAT from the Income Statement, D&A and Capex from the Cash Flow Statement, and changes in NWC from the Working Capital Schedule.
Sign Convention
- Income Statement: Revenue is positive. All expenses (COGS, SG&A, Interest, Taxes) should be entered as positive numbers and subtracted in subtotals (e.g., Revenue - COGS = Gross Profit).
- Balance Sheet: Assets are positive. Liabilities and Equity are positive.
- Cash Flow Statement: Cash inflows (Net Income, D&A, increases in liabilities, decreases in assets) are positive. Cash outflows (Capex, dividends, share repurchases, increases in assets, decreases in liabilities) are negative.
- Debt Schedule: Debt issuances are positive; debt repayments are negative.
Things Most Likely to Go Wrong
- "Failing to account for the difference between Funded Backlog and Total Estimated Contract Value; revenue should only be driven by firm backlog conversion, not unfunded IDIQ options."
- "Misinterpreting the Aerospace margin profile; margins expand significantly when R&D drops post-certification (as seen with the G700 in 2024/2025), so historical averages will understate future margins."
- "Overlooking the impact of customer advances (Contract Liabilities) on cash flow; General Dynamics receives massive progress payments for submarines which inflates OCF before the revenue is fully recognised."
- "Applying a generic gross margin assumption; the company reports 'Operating costs and expenses' which blends COGS and some operational overhead, requiring a direct-to-operating-margin forecasting approach."
- "Ignoring the cyclicality of Gulfstream deliveries; Q4 is always disproportionately large, meaning a straight quarterly run-rate will fail validation checks."
- "Double-counting corporate expenses; segment operating margins are reported before corporate unallocated costs, which must be subtracted separately to reach consolidated operating earnings."
- "Mismodelling the tax rate; the company benefits from R&D tax credits and foreign derived intangible income (FDII) deductions, keeping the effective rate structurally below the US statutory rate."
- "Failing to capture the step-up in Capex; the company is currently investing heavily ($1.2B in 2025) in shipyard expansion, so historical capex-to-revenue ratios from 2018-2020 are too low."
Validation Checks
- "Consolidated Operating Margin should remain between 9.5% and 10.5%; flag if it exceeds 11.0%."
- "OCF / Net Income conversion must be >1.0x; the company consistently generates cash in excess of GAAP earnings due to progress payments."
- "Capex as a % of revenue should be between 2.0% and 2.5% to reflect current shipyard expansion programmes."
- "Book-to-bill ratio should be >1.0x to support the forecasted revenue growth; if revenue grows while book-to-bill is <1.0x, the backlog is depleting unsustainably."
- "Balance sheet must balance: Total Assets = Total Liabilities + Shareholders' Equity in every forecasted period."
- "Debt / EBITDA should remain below 2.0x to align with management's commitment to their A-tier credit rating."
- "Effective tax rate should remain between 16.0% and 17.5%."
- "Dividend payout ratio should remain between 35% and 45% of net earnings."
Key Assumptions (Default Values)
| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| Aerospace Revenue Growth | 10.0 | % | Reflects continued ramp-up of G700 and introduction of G800. |
| Marine Systems Revenue Growth | 8.0 | % | Driven by increased output and tonnage on Virginia and Columbia-class submarines. |
| Combat Systems Revenue Growth | 4.0 | % | Steady demand for munitions and international vehicles, offset by M10 Booker termination. |
| Technologies Revenue Growth | 2.5 | % | Modest growth in IT services in a highly competitive federal market. |
| Aerospace Operating Margin | 13.5 | % | Margin expansion due to reduced R&D post-G700 certification. |
| Marine Systems Operating Margin | 7.2 | % | Slight improvement expected from 7.0% in 2025 due to better cost management. |
| Combat Systems Operating Margin | 14.1 | % | Management guidance for 2026. |
| Technologies Operating Margin | 9.2 | % | Management guidance for 2026. |
| Capex as % of Revenue | 2.3 | % | Based on $1.2B capex on $52.6B revenue in 2025. |
| Effective Tax Rate | 16.5 | % | Historical average reflecting R&D credits and FDII benefits. |
| Dividend Per Share (Annual) | 6.36 | $ | Based on declared quarterly dividend of $1.59. |
| Weighted Average Interest Rate | 3.8 | % | Blended rate on existing fixed-rate senior notes. |
| DSO (Days Sales Outstanding) | 50 | Days | Historical average based on accounts receivable balance. |
| WACC | 7.5 | % | Standard discount rate for large-cap prime defence contractors. |
| Terminal Growth Rate | 2.0 | % | Aligns with long-term US GDP and defence budget growth. |
Data Sources & Benchmarks
- Filings: SEC EDGAR database for General Dynamics (GD) 10-K, 10-Q, and 8-K filings. Investor Relations page at investorrelations.gd.com for earnings presentations and backlog schedules.
- Key Peers: Lockheed Martin (LMT), Northrop Grumman (NOC), RTX Corporation (RTX), Huntington Ingalls Industries (HII) for shipyard benchmarking, and Textron (TXT) for business jet benchmarking.
- Industry Data: US Department of Defense (DoD) budget request documents (PB26/PB27), General Aviation Manufacturers Association (GAMA) quarterly aircraft shipment reports.
- Consensus Estimates: Bloomberg, FactSet, or Yahoo Finance for consensus revenue, EPS, and target price validation.
Sources
- General Dynamics Q4 and Full-Year 2025 Earnings Release (January 28, 2026)
- General Dynamics 2025 10-K Financial Highlights
- General Dynamics Q3 2025 Earnings Release (October 24, 2025)
- General Dynamics Dividend Declaration Press Release (March 9, 2026)
- General Dynamics 2024 Annual Report
- Investing.com Q4 2025 Earnings Call Transcript and Guidance
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Frequently asked
What are General Dynamics' primary business segments and what do they offer?+
General Dynamics operates through four main segments: Marine Systems, Technologies, Aerospace, and Combat Systems. These segments provide a range of products and services including business aviation, ship construction, land combat vehicles, weapons systems, and technology products. The company serves both the US Department of Defense and commercial aviation markets.
What are the main drivers of General Dynamics' revenue across its diverse operations?+
General Dynamics' revenue is primarily driven by defense budget appropriations from the US Department of Defense and allied nations. Additionally, backlog conversion rates for its defense contracts and demand within the business jet market, particularly through its Gulfstream subsidiary, are significant contributors.
What is the assumed capital expenditure as a percentage of revenue in the General Dynamics financial model?+
In the General Dynamics financial model, the assumed capital expenditure (Capex) as a percentage of revenue is approximately 2.47%. This rate reflects the company's ongoing investments, which are currently elevated to expand submarine production capacity and Gulfstream service centers.
What is the main purpose of the General Dynamics financial model for an equity analyst?+
The General Dynamics financial model is designed to project the company's consolidated earnings and cash flow, as well as its overall valuation. This enables an equity analyst to determine a target price for GD stock and assess the sustainability of its dividends.
Is there a downloadable Excel financial model available for General Dynamics (GD)?+
Yes, there is a downloadable Excel financial model available for General Dynamics. This model projects the company's financials from FY2026 to FY2030, based on key assumptions like revenue growth and margin percentages.
How does General Dynamics manage its working capital, given its business model?+
General Dynamics frequently operates with favorable working capital dynamics due to customer advances and progress payments. These payments, categorized as Contract Liabilities, help fund the build-up of inventory, particularly in the Aerospace segment.
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