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Analyzing Financial Ratios and Performance Review

Please help with the 3 discussion parts of the question, and review the work performed.

(a) Calculate the following liquidity ratios for the current year, and discuss the relative liquidity
of the two companies.
1 Current ratio.
2 Quick (acid-test) ratio.
3 Current cash debt coverage.
4 Accounts receivable turnover.
5 Inventory turnover.

(b) Calculate the following profitability ratios for the current year, and discuss the relative
profitability of the two companies.
1 Asset turnover.
2 Profit margin on sales.
3 Return on assets.
4 Return on common stockholders' equity.

See attached.


Solution Preview


Manitowoc Company and Caterpillar Corporation are both producers and sellers of
large fixed assets. Caterpillar is substantially larger than Manitowoc. Financial information taken
from each company's financial statements is provided below.

Caterpillar Manitowoc
(in millions) (in thousands)
Financial Highlights Current Year Prior Year Current Year Prior Year

Cash and short-term investments 638 419 16,635 16,163
Accounts receivable 4,285 4,290 51,011 29,500
Inventory 1,921 1,835 52,928 36,793
Other current assets 803 865 14,571 14,082
Current assets 7,647 7,409 135,145 96,538
Total assets 16,830 16,250 324,915 159,465
Current liabilities 6,049 5,498 110,923 54,064
Total liabilities 13,442 13,339 243,254 84,408
Total stockholders' ...

Solution Summary

This solution explains the financial analysis with the help of ratios