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    Analyzing Financial Ratios and Performance Review

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    Instructions
    (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.

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    Solution Preview

    BYP4-10

    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

    $2.49

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