Interpreting Financial Stateme

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 Yr. Prior Yr. Current Yr. Prior Yr.
Cash and short-term $638 $419 $16,635 $16,163
investments
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’ $3,388 $2,911 $81,661 $75,057
equity
Sales $15,451 $313,149
cost of goods sold $12,000 $237,679
Interest Expense $191 $1,865
Income tax expense $501 $8,551
Net income $1,136 $14,569
Cash provided from $2,190 $16,367
operations

(a) Calculate the following liquidity ratio for the current year, and discuss the relative liquity 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) Retun on assets.
(4) Return on common stockholders’ equity.
(c) Calculate the following solvency ratios fo rthe current year, and discuss the relative solvency of the two companies.
(1) Debt to assets.
(2) Times iterest earned.

INTERPRETING FINANCIAL STATEME

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.

INTERPRETING FINANCIAL STATEME

The Coca-Cola Company and PepsiCo, Inc. provide refreshments to every corner
of the world. Selected data from the 2004 consolidated financial statements for The
Coca-Cola Company and for PepsiCo, Inc., are presented here (in millions).
CocaCola PepsiCo
Total current assets $ 12,094 $ 8,639
Total current liabilities 10,971 6,752
Net sales 21,962 29,261
Cost of goods sold 7,638 13,406
Net income 4,847 4,212
Average (net) receivables for the year 2,131 2,915
Average inventories for the year 1,336 1,477
Average total assets 29,335 26,657
Average common stockholders’ equity 15,013 12,734
Average current liabilities 9,429 6,584
Average total liabilities 14,322 27,917
Total assets 31,327 27,987
Total liabilities 15,392 14,464
Income taxes 1,375 1,372
Interest expense 196 167
Cash provided by operating activities 5,968 5,054
Capital expenditures 755 1,387
Cash dividends 2,429 1,329

Instructions
(a) Compute the following liquidity ratios for 2004 for Coca-Cola and for PepsiCo and
comment on the relative liquidity of the two competitors.
(1) Current ratio. (4) Inventory turnover.
(2) Receivables turnover. (5) Days in inventory.
(3) Average collection period. (6) Current cash debt coverage.
(b) Compute the following solvency ratios for the two companies and comment on the
relative solvency of the two competitors.
(1) Debt to total assets ratio.
(2) Times interest earned.
(3) Cash debt coverage ratio.
(4) Free cash flow.
(c) Compute the following profitability ratios for the two companies and comment on
the relative profitability of the two competitors.
(1) Profit margin.
(2) Asset turnover.
(3) Return on assets.
(4) Return on common stockholders’ equity.

Interpreting Financial Stateme

Compute profitability ratios –

Please help calculate 1. Profit margin, 2. Asset turnover, 3. Return of assets. 4 Return on common stockholder’s equity for Walmart/Target. What information outside the annual report may be useful to you as an investor? Why?