Caterpillar, Inc CNH Global 2014 2013 2012 2013 Profit Margin 7.09% 7.19% 9.01% 8.22%
I have performed DuPont analysis on Caterpillar Inc. and its closest competitor, CNH Global. Your analysis should include a discussion of the strengths or weaknesses revealed in each ratio. Please analyze the Profit margin.
| Caterpillar, Inc | CNH Global | ||||
| 2014 | 2013 | 2012 | 2013 | ||
| Profit Margin | 7.09% | 7.19% | 9.01% | 8.22% | |
I have performed DuPont analysis on Caterpillar Inc. and its closest competitor, CNH Global. Your analysis should include a discussion of the strengths or weaknesses revealed in each ratio. Please analyze the Profit margin.
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| Problem 4-23 Data for Barry Computer Co. and its industry averages follow.
Construct the Du Pont equation for both Barry and the industry. Round your answers to two decimal places.
a)The firm's days sales outstanding is more than the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well above the industry average so sales should be increased, assets increased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity and assets. However, the company seems to be in an above average liquidity position and financial leverage is similar to others in the industry. b)The firm's days sales outstanding is comparable to the industry average, indicating that the firm should neither tighten credit nor enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets increased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity and assets. However, the company seems to be in a below average liquidity position and financial leverage is similar to others in the industry. c)The firm's days sales outstanding ratio is more than twice as long as the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets decreased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity and assets. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry. d)The firm's days sales outstanding is more than twice as long as the industry average, indicating that the firm should loosen credit or apply a less stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets increased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity and assets. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry. e)The firm's days sales outstanding is less than the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets decreased, or both. While the company's profit margin is lower than the industry average, its other profitability ratios are high compared to the industry - net income should be higher given the amount of equity and assets. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry. 3) Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2014. How would that information affect the validity of your ratio analysis? (Hint: Think about averages and the effects of rapid growth on ratios if averages are not used. No calculations are needed.) Select true statement a) If 2014 represents a period of supernormal growth for the firm, ratios based on this year will be accurate and a comparison between them and industry averages will have substantial meaning. Potential investors need only look at 2014 ratios to be well informed, and a return to normal conditions in 2013 could help the firm's stock price. b) If 2014 represents a period of normal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have little meaning. Potential investors who look only at 2014 ratios will be misled, and a continuation of normal conditions in 2013 could hurt the firm's stock price. c) If 2014 represents a period of normal growth for the firm, ratios based on this year will be accurate and a comparison between them and industry averages will have substantial meaning. Potential investors who look only at 2014 ratios will be misled, and a return to supernormal conditions in 2013 could hurt the firm's stock price. d) If 2014 represents a period of supernormal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have substantial meaning. Potential investors who look only at 2014 ratios will be well informed, and a return to normal conditions in 2013 could hurt the firm's stock price. e) If 2014 represents a period of supernormal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have little meaning. Potential investors who look only at 2014 ratios will be misled, and a return to normal conditions in 2013 could hurt the firm's stock price. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note:
This question has been answered totally from 1-8 questions in previuos requested, the only part ( need to answer ) I need to help me with that to have completed the calculations, provide a brief, two- to four-sentence rationale for how these calculations can be used in analyzing the financial position of a company and why they are important. Your rationale should explain what information the ratio provides to the reader and how the reader may use that information.
I will repeat tyoing the question for make it clearing .
Analysis of Financial Statements
Balance Sheets
EXHIBITS: INPUT DATA (XYZ)
Table 1 Balance Sheets
| Assets | 2013E | 2012 | 2011 |
| cash | $ 85,632 | $7,282 | $57,600 |
| Acount Receivable | 878,000 | 632,160 | 351,200 |
| Inventories | 1,716,480 | 1,287,360 | 715,200 |
| Total current assets | $2,680,112 | $1,926,802 | $ 1,124,000 |
| Gross fixed assets | 1,197,160 | 1,202,950 | 491,000 |
| Less: accumulated depreciation | 380,120 | 263,160 | 146,200 |
| Net fixed assets | $ 817,040 | $ 939,790 | $ 344,800 |
| Total assets | $3,497,152 | $2,866,592 | $ 1,468,800 |
| Liabilities and equity | |||
| Accounts payable | $ 436,800 | $ 524,160 | $ 145,600 |
| Notes payable | 300,000 | 636,808 | 200,000 |
| Accruals | 408,000 | 489,600 | 136,000 |
| Total current liabilities | $1,144,800 | $1,650,568 | $ 481,600 |
| Long term bonds | 400,000 | 723,432 | 323,432 |
| Total debt | $1,544,800 | $2,374,000 | $ 805,032 |
| Common stock (100,000 shares) | 1,721,176 | 460,000 | 460,000 |
| Retained earnings | 231,176 | 32,592 | 203,768 |
| Total common equity | $1,952,352 | $ 492,592 | $ 663,768 |
| Total liabilities and equity | $3,497,152 | $2,866,592 | $ 1,468,800 |
Analysis of Financial Statements
Income Statements
Table 2
Income Statements
| 2013E | 2012 | 2011 | |
| Sales | $7,035,600 | $6,034,000 | $ 3,432,000 |
| Cost of goods sold | 5,875,992 | 5,528,000 | 2,864,000 |
| Other expenses | 550,000 | 519,988 | 358,672 |
| Total operating exp. excl. depreciation and amortization | $6,425,992 | $6,047,988 | $ 3,222,672 |
| EBITDA | $ 609,608 | $(13,988) | $ 209,328 |
| Depreciation and amortization | 116,960 | 116,960 | 18,900 |
| Earnings before interest and taxes (EBIT) | $492,648 | $(130,948) | $190,428 |
| Interest expense | 70,008 | 136,012 | 43,828 |
| Earnings before taxes (EBT) | $ 422,640 | $ (266,960) | $ 146,600 |
| Taxes (40%) | 169,056 | (106,784) | 58,640 |
| Net Income | $ 253,584 | $ (160,176) | $ 87,960 |
| Earnings per share (EPS) | $ 1.014 | $ (1.602) | $ 0.880 |
| Dividends per share (DPS) | $ 0.220 | $ 0.110 | $ 0.220 |
| Book value per share (BVPS) | $ 7.809 | $ 4.926 | $ 6.638 |
| Stock price | $ 12.17 | $ 2.25 | $ 8.50 |
| Shares outstanding | 250,000 | 100,000 | 100,000 |
| Tax rate | 40.00% | 40.00% | 40.00% |
| Lease payments | $ 40,000 | $ 40,000 | $ 40,000 |
| Sinking fund payments | 0 | 0 | 0 |
Analysis of Financial Statements
Ratio Analysis
| 2013E | 2012 | 2011 | Industry Average | |
| Current ratio | * | 1.2 | 2.3 | 2.7 |
| Quick ratio | * | 0.4 | 0.8 | 1.0 |
| Inventory turnover | * | 4.7 | 4.8 | 6.1 |
| Days sales outstanding (DSO) | * | 38.2 | 37.4 | 32.0 |
| Fixed assets turnover | * | 6.4 | 10.0 | 7.0 |
| Total assets turnover | * | 2.1 | 2.3 | 2.6 |
| Debt-to- assets ratio | * | 82.8% | 54.8% | 50.0% |
| Times interest earned (TIE) | * | -1.0 | 4.3 | 6.2 |
| Operating margin | * | -2.2% | 5.6% | 7.3% |
| Profit margin | * | -2.7% | 2.6% | 3.5% |
| Basic earning power (BEP) | * | -4.6% | 13.0% | 19.1% |
| Return on assets(ROA) | * | -5.6% | 6.0% | 9.1% |
| Return on equity (ROE) | * | -32.5% | 13.3% | 18.2% |
| Price/earnings (P/E) | * | -1.4 | 9.7 | 14.2 |
| Market/book (M/B) | * | 0.5 | 1.3 | 2.4 |
| Book value per share (BVPS) | * | $4.93 | $6.64 | n.a. |
Requiremnts:
1. Calculate XYZâs 2013 current and quick ratios based on the projected balance sheet and income statement data.
2. Calculate the 2013 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover.
3. Calculate the 2013 debt-to-assets and times-interest-earned ratios.
4. Calculate the 2013 operating margin, profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE).
5. Calculate the 2013 price/earnings ratio, and market/book ratio.
6. Use the extended DuPont equation to provide a summary and overview of XYZâs financial condition as projected for 2013.
7. Use the following simplified 2013 balance sheet to show, in general terms, how an improvement in the DSO would tend to affect the stock price. For example, if the company could improve its collection procedures and thereby lower its DSO from 45.6 days to the 32-day industry average without affecting sales, how would that change âripple throughâ the financial statements (shown in thousands below) and influence the stock price?
Accounts receivable $878 Debt $1,545
Other current assets 1,802
Net fixed assets 817 Equity 1,952
Total assets $3,497 Liabilities plus equity $3,497
First, we need to calculate XYZâs daily sales.
Daily sales = Sales / 365
Daily sales = $7,035,600 / 365
Daily sales = $19,275.62
Target A/R = Daily sales à Target DSO
Target A/R = $19,276 Ã 32
Target A/R = $616,820
Freed-up cash = old A/R â new A/R
Freed-up cash = $878,000 â $616,820
Freed-up cash = $261,180
Note : All questions from 1-8 has been answered, but the only part I need help with to write the analysis or to provide a brief, two- to four-sentence rationale for how these calculations can be used in analyzing the financial position of a company and why they are important.
