Caterpillar Ratio Analysis

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Therefore, Caterpillar earned 4.36% from existing assets in the year 2014. Results from 2013 were equivalent while holding at 4.46%, and in the year 2012 Caterpillar’s return on assets was 6.39%. Caterpillar’s competitors displayed improved results with the Terex Corporation having a return on assets of 5.38% in the year 2014. Another competitor of Parker-Hannifin Corporation held a 7.84% return on assets, which is superior to Caterpillar’s 4.38%. (Quotes & Info- Yahoo! Finance, n.d.).
The Terex Corporation and Parker-Hannifin Corporation performed superior to Caterpillar in regards to return on assets. Caterpillar needs to keep a watchful eye upon the improved performance from its competitors to ensure business is not lost to either company.
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The Caterpillar ratio analysis will focus on receivables turnover and inventory turnover. Receivables turnover is a company 's total sales divided by receivables, while inventory turnover consists of sales divided by inventory Block, Hirt, & Danielsen, 2014, p. 63). Receivables turnover grants the ability to calculate a company’s efficiency in receiving financial backing while gathering amounts outstanding on that loan. Inventory turnover ratio is the selling and replacement, of inventory, over a defined …show more content…
In 2013, the ratio was 1.4 and in 2012, it was 1.43. Caterpillar as a company carries its assets approximately one and a half times it 's weight in liabilities, which is first-class business practice. (Quotes & Info- Yahoo! Finance, n.d.). Terex and Parker-Hannifin, Caterpillar’s competition, upheld a superior current ratio than the Caterpillar Company. Terex furnished a current ratio of 2.04 in the year 2014, while Parker-Hannifin supplied a 1.87 current ratio. Both companies carried an exceptional current ratio capable of utilizing resources outstandingly in the area if assets required liquidation. (Quotes & Info- Yahoo! Finance, n.d.). The industry for Farm & Construction Machinery carries a current ratio standard of 1.65 (Construction & Mining Machinery Industry, n.d.). Therefore, once again, Caterpillar fell short of industry averages in regards to the current ratio. Quick Ratio The quick ratio is another liquidity ratio requiring study to determining a company’s ability to liquidate assets. Quick Ratio displays the ability to pay current liabilities with the cash and short-term investments. The difference between current and quick ratios is merely the quick ratio eliminates inventory from the equation (Block, Hirt, & Danielsen, 2014, p.

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