Deere & Company: Inventory Turnover Ratio

The company that I chose to research is Deere & Company (DE). The companies sector is industrial goods and produces and sells farm and construction machinery. The three ratios that I believe are important in determining a company’s financial situation are the quick ratio, the inventory turnover ratio, and the net profit margin ratio. To find the quick ratio, we add cash, cash equivalents, short term investments and current receivables and divide them by the current liabilities. I found that the quick ratio is 1.86, we use this to find the companies liquidly position, which the company has $1.86 of liquid asset available to cover for every $1 of the company’s current liabilities. The inventory turnover rate allows us to determine how often the inventory is sold within a year. The rate is important because the company has a large amount of money tied up in its inventory, the higher the rate the more money the company will have to pay its debts. DE’s turnover rate is 5.02, which means that the inventory is on hand for about 73 days before being sold. For a farm and construction machinery company this rate is very …show more content…
The net profit ratio is the percentage of revenue remaining after all expenses and preferred stock are paid and that sum subtracted from the total revenue. This percentage shows how profitable the company is, and allows others to evaluate the company based on their profitability.
After doing a trend analysis for the gross profit and the net income that is applicable to the common share I found that the company is on a constantly downward trend from 2013 to 2015. The total revenue has been decreasing and the gross Profit from 2013 to 2014 is down 7% and from 2013 to 2015, the gross profit is down by 28%. For the common shares profit the net income is down 11% from 2013 to 2014 and down 45% comparing 2015 to 2013. Seeing these figures is very discouraging for a stock holder. The company is constantly losing net