Business Report of Caterpillar Inc.
Data and information relative to Caterpillar, Inc. was collected via the internet. Current information was crucial to keeping the report timely and accurate. The five members assigned to the group wrote one section per person. Research was conducted on a separate basis, and construction of the report was on a group level. Each team member is responsible for their own assigned areas and nothing more.
Caterpillar is a publicly traded corporation listed on the New York Stock Exchange. It’s SIC codes indicate their main areas of enterprise are construction machinery, internal combustion engines, and short term business credit and insurance. But this dynamic company has many qualities underneath the surface of its image. These qualities are neither good nor bad. These are Caterpillar’s financial components.
Caterpillar, Inc. primary income is made from sales of machinery and engines . These sales are made to clients in construction, agriculture, and manufacturing industries. Caterpillar divides their sales based on geographic location where the
For example, third quarter sales were split between North America, EAME (Europe, Africa, and the Middle East), Latin America, and Asia. North America on average takes up 54% of total sales each quarter (see figure 1.)
Total sales revenue for the third quarter 2000 amounted to $4.78 billion, one percent higher than the previous year third quarter. Sales volume increased by 2 percent and financial products increased by 12 percent.
Caterpillar bases their sales upon two different tiers, although they sell a wide range of different products. The first breakdown consists of what they deem as machinery. The second area of sales consists of engines. Operating profit comparisons for the third quarters of 1999 and 2000 can be seen in table 1.
Caterpillar has blamed third quarter deficiencies in revenue on the weak Eurodollar. Since 27 percent of their total sales are made in the European region, their claim may be true. As long as Caterpillar depends on foreign markets for sales, they will face problems with fluctuations in foreign currency.
Caterpillar owns and operates a financing corporation to handle its incredibly large receivable account. Receivables make up 30 percent of total assets and short-term receivables make up 65 percent of current assets. Caterpillar has an acid-test ratio of 1.05 and an accounts receivable turnover of 1.40. Caterpillar, obviously, has taken on a large amount of risk to itself because of this. If Caterpillar were forced to liquidate its assets and pay off its debt, it would have a very hard time trying. Therefore, Caterpillar’s receivable account is a real weakness to the corporation as a whole.
Inventories have been valued $871 million, an increase of $150 million from last year. This can be viewed in a multitude of ways. Caterpillar may be expecting...