Caterpillar Analysis
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 Analysis
“Financial statement analysis is a judgmental process.” (Gibson, 2012, pg. 199) We have learned several ratios to evaluate a company’s liquidity, long-term debt-paying ability, profitability, cash flow analysis, creditworthiness, and going concerns. Along with the ratios, commonsize analysis techniques or vertical and horizontal analysis can be used to evaluate trends in accounts from the financial statements. Commonsize analysis can also help give a true comparison when evaluating companies of different sizes. (Gibson, 2012) Comparing calculated ratios to competitors or industry standards can be used as benchmarks and can add meaning to the analysis. Financial statements are analyzed by banks, managers/owners, controllers, CPA’s, CFA’s, and investors. Since I would like to become a CPA, I chose some of the top ratios CPA’s find significant. Liquidity
The first ratio of significance is the current ratio. This ratio is important because it measure the company’s ability to meet their short-term liabilities. Caterpillar’s current ratio decreased 0.11 in 2011 and increased 0.12 in 2012 ending with 1.43. Since there is not a positive or negative trend to evaluate, a comparison with the industry standard will be helpful. From MSN Money the industry
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 Analysis
“Financial statement analysis is a judgmental process.” (Gibson, 2012, pg. 199) We have learned several ratios to evaluate a company’s liquidity, long-term debt-paying ability, profitability, cash flow analysis, creditworthiness, and going concerns. Along with the ratios, commonsize analysis techniques or vertical and horizontal analysis can be used to evaluate trends in accounts from the financial statements. Commonsize analysis can also help give a true comparison when evaluating companies of different sizes. (Gibson, 2012) Comparing calculated ratios to competitors or industry standards can be used as benchmarks and can add meaning to the analysis. Financial statements are analyzed by banks, managers/owners, controllers, CPA’s, CFA’s, and investors. Since I would like to become a CPA, I chose some of the top ratios CPA’s find significant. Liquidity
The first ratio of significance is the current ratio. This ratio is important because it measure the company’s ability to meet their short-term liabilities. Caterpillar’s current ratio decreased 0.11 in 2011 and increased 0.12 in 2012 ending with 1.43. Since there is not a positive or negative trend to evaluate, a comparison with the industry standard will be helpful. From MSN Money the industry
References: Gibson, C. H. (2012). Financial reporting & analysis (13th ed.). Mason, OH: South-Western Cengage Learning. Caterpillar Inc. Balance Sheet for December 30, 2012, 2011, and 2010. Retrieved from http://finance.yahoo.com/q/bs?s=CAT+Balance+Sheet&annual Caterpillar Inc. Income Statement for periods ending December 30, 2012, 2011, and 2010.