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Our cash position is not great, and was better in each of the past two years. This partially explains the growth in the accounts payable. There has not been any substantial growth in receivables but our cash conversion cycle has been affected by excess inventory. Inventory as a percentage of total assets was 17.8% in 2011, compared with 12.8% five years ago. We are simply not selling our inventory as quickly as we need to, and this has led to a situation where we have to stretch our payables.
The company has also taken on more long-term debt last year, adding $4.5 billion in long-term debt. This takes the long-term debt to the highest level it has ever been. Part of this could be related to the cash conversion cycle, but it also hints at...
Yet, our margins are better than they have in the past few years and there has been no specific escalation in our operating costs. Our ratio of selling, general and administration expense to revenue has remained largely unchanged in the past five years.
It seems that in absence of a specific internal factor, we simply do not perform as efficiently as our competitors do. We need to find ways to improve our products and our marketing, so that we can not only sell more but sell at higher margins. At some point, the escalation of debt needs to stop, so the company should position its cash flow in a way that will allow for this. After two years of retiring debt, we added to it this past year, and that…
The company has been profitable for the past five years, so there is little excuse for this type of financial underperformance. The company's liquidity has actually improved, compared with where we were five years ago, when we had a current ratio of 1.14. The past year, however, saw a spike in accounts payable, which is something over which we have control. Our cash position is not great, and was better in each of the past two years. This partially explains the growth in the accounts payable. There has not been any substantial growth in receivables but our cash conversion cycle has been affected by excess inventory. Inventory as a percentage of total assets was 17.8% in 2011, compared with 12.8% five years ago. We are simply not selling our inventory as quickly as we need to, and this has led to a situation where we have to stretch our payables.
The company has also taken on more long-term debt last year, adding $4.5 billion in long-term debt. This takes the long-term debt to the highest level it has ever been. Part of this could be related to the cash conversion cycle, but it also hints at spending that is out of control. Yet, our margins are better than they have in the past few years and there has been no specific escalation in our operating costs. Our ratio of selling, general and administration expense to revenue has remained largely unchanged in the past five years.
It seems that in absence of a specific internal factor, we simply do not perform as efficiently as our competitors do. We need to find ways to improve our products and our marketing, so that we can not only sell more but sell at higher margins. At some point, the escalation of debt needs to stop, so the company should position its cash flow in a way that will allow for this. After two years of retiring debt, we added to it this past year, and that approach is only making it more difficult to improve our financial condition in other areas.
The company has grown substantially over the past several years in terms of revenues, profits and share price. In 2008, however, the company's share price has declined 45.3% from the beginning of the year. As the economic crisis spread overseas, Caterpillar's policy of geographic diversification is at risk of being insufficient to insulate the firm from global economic catastrophe. Maintaining the current path, however, recognizes the long-term strength of
Caterpillar Inc. Global Financial Prospectus, 2010 A financial and qualitative leader in product and services in the heavy equipment industry, Caterpillar has been an expert in construction and mining equipment, diesel and natural gas engines and industrial gas turbines for over 80 years. Outperformance of stated goals is consistent to Caterpillar's brand identity and expert financial outcomes in its manufacturer industry class. Subsidiaries Cat Financial, Caterpillar Logistics Services Inc., and Caterpillar Remanufacturing
While Caterpillar has its own financing arm, firms are not only dependent on Caterpillar to provide financing. Moreover, with interest rates at historic lows and capital investment low, the financing arm cannot be counted on to deliver strong top or bottom line growth. The present economic situation is a perfect storm for Caterpillar. Commodities prices have dropped dramatically over the past nine months. Credit is unavailable and when Caterpillar offers
EXTERNAL AND INTERNAL ENVIRONMENT-CATERPILLAR INC. External and Internal Environment Caterpillar: General Environment Economic Political Competition forces Supplier power: Medium Buyer power: High Addressing the competitive forces Supplier power Buyer power External threats and opportunities Resources, capabilities, and core competencies How Caterpillar leverages resources Vlaue chain analysis for improvement The external and internal environment of an organization significantly impacts the firm's performance and its ability to compete within the respective industry to which it belongs. Whereas internal environment is important in context of enhancing firm's performance,
Caterpillar The world of investing is full of choices. Selecting those areas which can provide above average returns requires focusing on corporations with: strong management, balance sheets and business models. These elements allow firms to increase its earnings, dividends and shareholder value. This is what some of the most successful corporations do to achieve these objectives. Since 1926, Caterpillar has been focused on providing tractors, construction equipment and other machinery to a
Financial Research Report This is a review of Caterpillar, Inc.. The report is broken down into three sections -- company overview, ratio analysis (which includes a trend analysis), stock price analysis -- that are designed to give a thorough overview of the complete company. Company Overview Caterpillar is one of the best known name brands, around the world for its manufacture of heavy machinery made, primarily, for the construction industry. The company began