The purpose of this thesis was to determine if a relationship existed between a defense firm's reliance on government business for revenue and the financial condition of the defense firm. Financial data on 37 defense firms were collected for the period 1983 to 1992. Nine financial ratios were used to measure financial condition and the percentage of total revenue attributed to government business was used to measure reliance on government business. Regression and tests for differences between group means were the methods used to determine if a relationship existed. The results of the tests performed did not provide sufficient, convincing evidence that there was a direct relationship between reliance on government business and financial condition of defense firms. The few tests that proved to be statistically significant showed that government business had a slight positive impact. These relationships were strongest when defense spending was increasing.
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