INTERPRETING FINANCIAL STATEMENTS/liquidity ratios/profitabi
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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.
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.
(c) Calculate the following solvency ratios for the current year, and discuss the relative solvency
of the two companies.
(1) Debt to assets.
(2) Times interest earned.
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Solution Summary
This explains the steps to interpret financial statement and liquidity ratios/profitability ratios
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 ...
Purchase this Solution
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