Analysis Based on the above factual data collected and complied

Analysis
Based on the above factual data collected and complied, we
now proceed to analysis the financial position of Caterpillar
Inc. with respect to its competitors and the industry. The
analysis is based on various parameters calculated above and
measured based on yardsticks such as Liquidity, Activity,
Leverage, Profitability, Market Value and Market-to-book ratio.
Liquidity
The first and foremost parameter to study liquidity is Net
working capital. It can be observed that the net working capital
has dropped by USD 2.87b when compared to 2014. The
operating cash flows have dropped by USD 4.51b. This, prima
facie appears to be alarming. However, on a careful evaluation
of the other factors and the competitors, the following can be
observedFinancial Analysis 11 | P a g e The main competitor as
well has witnessed a drop of USD 3.08b in their net working
capital numbers. Current ratio is stable and has not fluctuated.
(from 1.39 to 1.31) The revenues have dipped by 85% (from
USD 55b to USD 47b) It may be noted from the above that the
current ratio is stable. It can therefore be concluded that there
has not be any inefficiency as far as working capital
management is concerned. However, there is an indication that
there has been a slump in the industry as a whole in which the
company is operating i.e. Manufacture of earth moving and
other heavy equipment’s. The revenues have dipped by 15%
where the competitor’s revenues have dipped by 20%. One of
the broad causes for this can be attributed to an overall fall in
the commodity and metal prices worldwide. The competitor has
however, maintained very good liquidity position at 2.05 and is
one of the best in the industry which is averaging at 1.7. On the
whole, the working capital and liquidity levels are not the best
in the industry. However, considering the capital intensive
nature of business and heavy reliance on metal coupled with a
slump in the metal industry, it can be concluded that the

company has well managed and maintained its working capital
and liquidity position.
Activity
In order to evaluate the Activity and Efficiency of operation, we
have computed the Inventory and Receivable number of days.
Inventory days have only marginally increased from 112 days to
116 days and receivable days from 123 to 139 days. On a
careful analysis of these two parameters, it can be observed that
in-spite of the pressure on the revenues, the Inventory days and
receivable days have not drastically fluctuated. This is an
indicator that the management has been quite sensitive to the
developments in the industry and had taken adequate
precautions regularly in order to keep the working capital under
control. It can also be seen that the competitor could not control
the receivable days and have increased by 82 days. With a dip
in revenue, there is a high likelihood that the inventories pile up
and customer payments get delayed resulting in higher
inventory days and receivable days. However, in case of
Caterpillar Inc., they have done a commendable job of keeping
both these parameters under control.
Leverage
Debt to equity ratio is the best measure to assess how the
capital is leveraged. The D/E ratio of Caterpillar Inc. for the
current year and previous year has been 2.57 and 2.35
respectively. This simply means that the company relies on debt
capital 2.5 times that of the shareholders equity. In short, the
company is heavily debt leveraged. This is the reason why the
interest costs are very high (almost 2-3% of the revenues). The
interest coverage ratio indicates that the EBIT covers the
interest expense only by 6 times in 2015 whereas it used to be
11.5 times in the previous year and industry average is 14.12. It
however needs to be remembered that this is a heavily capital
intensive process industry and requires huge amount of capital
investment for its process. On a comparison of the competitor’s
numbers, it can be seen that their D/E ratio is enormous. It is
clear that the competitor is not safely placed in the industry on

capital leverage terms. On the contrary, the industry is
maintaining a D/E ratio of only 0.69. This is certainly a matter
of concern for both Caterpillar Inc. as well as the competitor.
Both the companies are nowhere in competition when it comes
to the capital leverage of the industry as a whole. Caterpillar
Inc. has to take urgent measures to improve its capital structure
either through public offerings or institutional investment and
try and reduce its debts and in-turn reduce the interest burden
which is almost 50% of its Net Income.
Profitability
The two parameters namely Return on Equity (ROE) and Profit
Margin have been calculated to assess the profitability of the
business with respect to the competitor and the industry. It can
be seen that Caterpillar Inc. is reporting 14.19% of ROE which
has however decreased from the last year number of 22.06%.
This decrease is mainly due to a decrease in the profit margin
from 6.7% to 4.47% YoY. What is also worth noting is that the
ROE number of the competitor are very high at 28.775 for the
year 2015. The main reason is that the competitor Deere & Co.
is able to generate more than 2% higher net income and is
continuing to do so even in the current year. Deere & Co. is also
able to match the industry average which is not a very positive
sign for Caterpillar Inc. What is also worth noting is that the
industry average of ROE is only 10.11% whereas the target
company and the competitor are able to report a very good
number. This however, is misleading. It may be recalled in the
previous section where D/E ratio was discussed that both
Caterpillar Inc. and Deere & Co are operating with very high
debt vis as vis the Sharholders Equity whereas the industry
average of D/E ratio was very low. ROE considers the net
income with respect to only the shareholders equity. As a result
of this, the ROE of Caterpillar Inc. and Deere & Co. is very
high compared to the industry average which might mislead the
users and public and may lead to wrong decisions if not read
along with the D/E ratio Caterpillar Inc. is not well placed in
terms of profitability vis a vis the competitor as well as the

industry. It is facing heavy pressure on its revenues due to
market and industry factors. This coupled with its inability to
match the competitor and industry margin by 2% will put more
burden on the operations team to stay ahead in the race.
Market Value
The market value of Caterpillar is USD 44.47b whereas that of
Deer & Co. is USD 24.62b. The market price of the share of the
both the companies are at an average of 76-78 presently. In
spite of the same levels of price per share, Caterpillar is
enjoying a very high market value when compared to the
competitor. This is an indicator of the reliance placed by the
shareholders of the company. There can be various reasons to
this such as excellent track record, reputation, higher dividend
yield, reputation of the key managerial personnel, quality of the
products, shareholder sentiments etc. These factors can be both
monetary and nonmonetary. There can be even emotional
reasons for such high market value. It is also worth noting that
the high market value is in-spite of reporting a lower EPS than
the competitor. From the investor point of view, such
sentiments are positive signs of long term trust and faith on the
management. For the same reason, the PE ratio of Caterpillar is
very high when compared to the competitor.
Market-to-book ratio
Market-to-book ratio measures the market value vis a vis its
book value. This measures whether the stock is overvalued or
undervalued in the market. If the stock is undervalued, that will
be strong reason to buy the stock as there is a hope that in the
long run it will aleast match its book value if not higher. An
overvalued stock on the other hand has to be carefully
evaluated. There are various factors both monetary and non-
monetary as discussed in the previous section. This is where the
reported financial numbers play a crucial role to properly
evaluate the company’s performance and also predict future
prospects. Given the above facts, the M/B of Caterpillar Inc. is
3 whereas Deere & co. is 3.65. This indicates that Caterpillar is
3 times overvalued with respect to its book value.

Conclusion & Recommendation
On a careful examination of the financial position and various
ratios such as liquidity, Activity, leverage, profitability &
market value, following are the conclusions. Caterpillar Inc. is
best placed in the industry and is ahead of its competitors in
terms of Management of working capital, Internal controls and
Efficiency in managing resources and market value. In terms of
profitability, it has to improve by at least 2% in order to match
the competitors and industry averages. In terms of capital
leverage and interest coverage, there is lot of scope for
improvement. At present, Caterpillar Inc. is likely to leverage
its market value to improve its capital structure and improve its
D/E ratio and Interest coverage which can give long term
benefits in terms of profitability. In spite of a strain on the
revenues and profits, it has been able to maintain a good
dividend yield, P/E ratio and market value. Based on the above
strong factors working in favour of Caterpillar and also a
potential improvement in the commodities & metals market
outlook, we give a BUY recomm
6/24/2021 Topic: DISCUSSION 4 -- COLLABORATIVE
WRITING
https://sjsu.instructure.com/courses/1424294/discussion_topics/
4312650 1/7
This is a graded discussion: 25 points possible
due Jun 26
DISCUSSION 4 -- COLLABORATIVE WRITING 13 13
Search entries or author

Share a time when you worked on a writing in a collaborative
environment and the work turned
out perfectly. Discuss what reasons you believe contributed to
the success of this project.
What challenges, if any, were present. Did those challenges
contribute to the success of the
project because of the effort required to overcome them?
Submit your response (in APA format for any references used) –
15pts.
Reply to two (2) other posted responses for full points – 5pts. +
5pts. for each reply.
Total possible points = 25
ed
(https:// Joy Everson
(https://sjsu.instructure.com/courses/1424294/users/4253321)
Saturday
In my Engr 10 class, there were multiple group projects, but one
stands out in particular
(the wind turbine assignment). It is to this day one of my
fondest college memories. My
teammates ended up being more than just colleagues, they
became my friends. We would
dedicate group time to our projects and work collaboratively
over food and drinks. We'd
make jokes here and there and we'd take breaks together and

laugh about our mistakes
and felt comfortable going to one another for advice. What
could have been negative
(setbacks, mistakes, and just the overall challenge of working
with and depending on
others) was instead experienced in a positive light. Everyone
just got along so well to the
point that the project didn't feel like an academic responsibility.
It felt like we were all
buddies hanging out and having fun experimenting with our
curiosities. At one point, we
ended up having to stay up all night in my apartment's study
room with coffee to finish the
project. It ended up being a proper 16 page research paper and a
20 slide slideshow that I
am still proud of. I think the greatest challenge of collaboration
isn't the content, it's the
interactions. Being open and honest with teammates about one’s
knowledge and
capabilities, learning about one another's lives to bond, and
retaining the element of fun are
https://sjsu.instructure.com/courses/1424294/users/4253321
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4312650 2/7
all so powerful in motivating people to work together. I think
groupwork challenges are just

opportunities to learn more about one another and become even
more successful. All
experiences (good, bad, difficult, easy) are lessons that help us
grow as people. A life
without challenges isn't much of a life, in my honest opinion.
(http Dang Minh Nhu Nguyen
Yesterday
Hi Joy,
I love how you and your friends stayed positive to finish the
project in such long time. I
mean sixteen pages of researching paper, and twenty slideshows
sound exhausted,
bravo to the team! From what you've wrote, I could definitely
feel that you all is going to
be good friends. In addition , I totally agree that being open and
honest towards your
team members, though sometimes this can be a challenge, is one
of the most powerful
move to encourage the team in working their best together. I
personally do not like face
challenges, but I also have to admit that nobody can live their
life to the fullest without
facing any trouble.
(https:// Dang Minh Nhu Nguyen
Yesterday

Discussion 4: COLLABORATIVE WRITING
During the summer of 2019, I was placed in a group
with three other people to work on a coding project using the
Python
programming language. We ran into a few issues, the most
serious of which being a disagreement in preferred coding
languages. We
didn't know how to code in each other's languages and, to make
matters worse, we didn't know anything about Python, two had
no
prior experience in the field. Our group's leader developed a
plan for each member, detailing who is responsible for which
task(s) and
when we will meet. We spent time together doing language
research, learning, and studying. We also brainstormed project
ideas, the
group members and I genuinely criticizing each other's for
improvements in the end. After a week, we were able to
complete the
project with a game that could endure for ten minutes. It's
incredible to me since I can hardly get a program to run, but
with the help
and support of the other group members, who all came from
different backgrounds than mine, we were able to develop
something
we'd never done before. We were able to overcome the
difficulties thanks to the team's unity and dedication. We valued
each other and
strived to improve as a team. No one was left behind, and we've
all learned something afterwards.

(http Andreah Cruz
Yesterday
Hello Dang!
I find that which language to use is such a big problem in a
school environment. It's
weird since SJSU is mainly focused on Java, so for the most
part people like me only
WRITING
4312650 3/7
know Java. I would understand why some people would want to
do python since from
what I remembered it's one of the easiest langua ges. I can also
see your perspective
when you said it's hard for you to run your code since I find
coding pretty difficult to
understand on my own as well. Unfortunately, the past coding

teams I've experienced
were horrible since everyone just relied on others to know what
they're doing so I
couldn't ask many questions.
(http Mary Markart
11:48am
Hi Dang.
Working on coding projects as a group can be quite difficult. It
seems like your group
faced struggles early on, but were able to divide and conquer
the work efficiently. I
worked on a Java project with a group and I know that it can be
very difficult to develop
a game. It's admirable that your group was able to provide each
other with constructive
criticism. I would be interested in trying out your game
sometime!
(https:// Yatning Tam Belmonte
Yesterday
I took a class called Introduction to Industrial Systems, as a
final project of the class we

were put in groups to design, build and program a mini bottle
filling and storing system. We
were given metal sheets, wood boards, wires, relays and etc.
The final step of the project is
to write a user manual with illustration. The project turned out
very successful, the three of
us all made contributions in areas we were good at. I went to art
school and am very good
at drawing, so I did the illustration part. One person had
experience working with industrial
systems so he drafted the manual, the other person did not mind
doing the editing and
making everything look pretty. I did proof reading and made
suggestion for improvement
and simplification. There wasn't too much challenge to write the
document, everyone was
fairly efficient because it was a fun and fulfilling project.
(http Andreah Cruz
Yesterday
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4312650 4/7
Edited by Andreah Cruz
on Jun 23 at 7:21pm
Hello Yatning!
That was pretty smart of your group to put certain people in
areas they were great at.
That's pretty close to a work environment since we wouldn't put
someone who knows
finance to do the work of a software engineer. I'm a software
engineer, so when I look
back at group projects, it was pretty difficult since everyone
just split the work evenly
and I would be doing the same job as another person. With this,
I had to do self-
research despite the other person knowing his category pretty
well. I hope I can
implement this in future group projects if I can!
(https:// Andreah Cruz
Yesterday
The last time that I wrote a collaborative essay was a couple of
years ago in my
communications class and we were in a group of 3. It was meant
to be a persuasive essay

about abortion. Regardless of whether it was this project, I
firmly believe that
communication is a must in any collaborative environment.
Since our communication was
good within the project, we were able to finish it effectively and
efficiently. Communication
allows everyone in the group to understand what they’re doing
and their approach to the
project (Bass, 2019). If we know each other roles we could
either avoid re-doing someone
else’s role or help out anyone in the group that has questions. In
the group I was in, I was
able to give feedback on how we can write certain areas better
and vice versa. I believe the
only challenge I ran across was starting the assignment.
However, once we started to get a
flow going it was pretty easy to keep writing. I wouldn’t say
this contributed to our success
because not starting sooner just postponed us a bit back.
However, it did help everyone in
the group to understand how long writing takes so we were able
to get an understanding
for future assignments. Although we knew how long future
assignments would take, it did
not really help the case of procrastination within students.
Considering everything I enjoyed
my time with the group and procrastination wasn’t such a big
issue.
References
Bass, A. (2019, July 2). Why Is Team Communication Important
When in Teams? Career
Trend. https://careertrend.com/why-is-team-communication-
important-when-in-teams-

4233172.html.
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(http Mary Markart
11:42am
Hi Andreah.
That is a very loaded topic to discuss in a persuasive essay. I
agree that the hardest
part of a project is getting started because it's so easy to
procrastinate when a big
project is due. I have trouble getting an assignment started when
it is worth a lot of my
grade and I feel overwhelmed. It seems like your group had
very clear roles and
responsibilities which contributed to the success of the essay.
Despite the topic being
quite controversial, it seems that your group tackled it well.
(http Olivia Sanchez

2:11pm
Hi Andreah! I agree that communication is big when working in
group projects. I don't
think any type of group work can be successful without
communication. Like you
mentioned in your discussion, communication helps each group
member know what
they're doing in the project. I once had to do a group project
with two group members
who weren't good at communicating. We ended up getting a
poor grade, because our
project was lacking a lot, since both members did similar topics.
It is lesson that I
learned. Going forward with any group projects, I try to make
sure that I communicate
with my group members, so that nothing is unclear.
(https:// Mary Markart
11:33am
When I worked as a manual quality assurance tester at a
cybersecurity company in 2018, I
led a project rewriting over 800 test cases. As the leader of this
project, I worked with a
team of three coworkers. I had worked with these individuals
for a few months and

determined their strengths and weaknesses for the test cases and
divided the work based
on their ability. Each member had a daily goal and I provided a
spreadsheet for them to log
their progress. Despite careful planning, occasionally one of the
writers would not know
how to complete a test. In this case, I would walk through the
test with them. The goal in
writing a good test case is to imagine the individual reading it
has no knowledge of how to
complete the test and walk through the preconditions and steps
in as much detail as
possible. This means that sometimes someone learning the test
for the first time has better
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knowledge of how to write it since they have just seen how to
complete it. After a month of
this project, we completed all the test cases and future testing
productivity was increased,
and training new hires became a lot more efficient.

(http Olivia Sanchez
1:52pm
Hi Mary! Being a manual quality assurance tester is a big
position, but from reading
your post it seems like you were very successful in this
position. I think as a leader, you
did everything needed to have a successful project. Determining
the strengths and
weaknesses of each group member is a great tactic, that way you
can place people in
their appropriate assignment. With this course, we did
something similar with our group
project. We assigned our members to parts that they would
thrive in. I also think it is
great that you learned your member's weaknesses, because you
were able to help
people overcome their weaknesses by giving them more training
in the areas they
needed. There is a saying that a team is only as strong as their
weakest member.
Knowing strengths and weaknesses of members helped your
project significantly, and I
think this strategy would help any group project be successful.
(https:// Olivia Sanchez
1:29pm

This past semester, a group project was the final for one of my
math courses. The
assignment was a presentation on a mathematician. I think in
any group work setting, it is
important that the group members work together to determine
the structure of the project,
and every group member does their part to make the project
successful. In my group, we
each determined what we wanted to talk about. Everyone had a
say in the content of the
project, and I think that was more efficient than having one
person be in charge. We each
were able to contribute our own creative ideas. It was also
helpful that all of my group
members, including myself, were on top of their section of the
project, so our project was
complete and well-done. We received comments from our
professor and classmates that
said that our project was engaging and well-organized, which in
my opinion was the goal of
our project. What also made our presentation successful, was
that we were able to meet
prior to our presentation day to review our project, and make
sure that our presentation
was organized clearly. This is key, because although each group
member works on their
own section, it is better to have a project that looks like only
one person did it. By this, I
mean that the project flows well with thoughtful transitions.
When it comes to group
projects, I believe that working together as a group is what
makes group work successful.

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