Caterpillar Analysis

1696 Words Jan 4th, 2014 7 Pages
Caterpillar Inc. Analysis
FIN400 – Analyzing Financial Statements
June 23, 2013

Caterpillar Inc. Analysis Caterpillar Inc. is a global company headquartered Peoria, Illinois. They specialize in the manufacturing and selling of construction, mining, and farm equipment. Caterpillar Financial Services is a subsidiary company that offers financing options to their customers. I currently work of a construction company and I specialize in the accounting management of the company’s assets. Approximately 80% of the company assets are from Caterpillar and 70% of the assets that are financed are through Caterpillar Financial Services. The stability of Caterpillar Inc. is important to the company I work for.
Financial Statement
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From MSN Money the industry standard current ratio is 2.01 which is 0.58 times higher than Caterpillar Inc. Accounts receivable turnover is another liquidity ratio used by CPA’s to evaluate the collection of the company’s accounts receivable in one year. The disclaimer with this ratio is the average gross receivable is used on an annual basis. To prevent the number from being skewed by seasonal activity it is best to use as much information as possible that you have access to; quarterly, monthly, or weekly will give you a more accurate picture. Caterpillar’s accounts receivable turnover ratio has increased over the past three years by 0.8 times. The positive trend is great and shows that the company is making progress in collecting their receivables to help the liquidity. Unfortunately they are still 0.64 times slower than the industry so they still have room for improvement. The next ratio for liquidity is the quick ratio or also known as the acid-test ratio. This takes the current ratio a step further because it shows the immediate position of the company in regard to meeting current liabilities. This ratio removes inventory because although it is an asset it could take time to sell off the inventory so we cannot count this as immediate cash to fulfill current liabilities if needed in an emergency situation. Caterpillar’s quick ratio has declined from 2010 to 2012 and is extremely low when compared to the industry. The industry standard…