Assessment of the Liquidity of a Company in the Machinery Industry

Zhongming Yu

Bachelor's thesis

Abstract:

This thesis is aimed to the assessment of liquidity of a company in machinery industry.Liquidity means the ability to translate the current assets to cash to pay off the current liabilities.Company with a good liquidity will be harder to meet the problems on paying off the obligation. We will use the liquidity ratios to judge the company’s liquidity.The liquidity ratio are current ratio,quick ratio and cash flow ratio and each of these ratio all has its emphases on the liquidity in different way.By use these ratios to analysis the company’s liquidity,we can know its liquidity level and we will compare with the other companies in the same industry.We also will analysis what can influence company’s liquidity and how to increase or decrease the liquidity. Our company can use this analysis to make decisions for the company to have a health liquidity.

Abstract:

This thesis is aimed to the assessment of liquidity of a company in machinery industry.Liquidity means the ability to translate the current assets to cash to pay off the current liabilities.Company with a good liquidity will be harder to meet the problems on paying off the obligation. We will use the liquidity ratios to judge the company’s liquidity.The liquidity ratio are current ratio,quick ratio and cash flow ratio and each of these ratio all has its emphases on the liquidity in different way.By use these ratios to analysis the company’s liquidity,we can know its liquidity level and we will compare with the other companies in the same industry.We also will analysis what can influence company’s liquidity and how to increase or decrease the liquidity. Our company can use this analysis to make decisions for the company to have a health liquidity. We choose Caterpillar as our company and we choose Terex and komatsu to compare with our company.We will analysis Caterpillar’s financial statement to know it’s financial position.While we get enough data,we will do liquidity analysis to this three companies.we will use these data to calculate the indicators of liquidity ratio.For clearly to compare the result,we firstly put the result into the table and then make it to the chart.We will get some conclusion from these and we want to know what cause the differences.So we choose the most typical liquidity ratio which is current ratio and decompose it to do pyramidal decomposition analysis.From theses,we can know the influence caused by different indicators.In the end, we will do sensitive analysis to help the company do the decision in next year. By all the steps we do,we can know Caterpillar’s financial position and how its liquidity it is between the other companies in same industry.We also analysis what reason influence Caterpillar’s performance.In the end,we will give our suggestions to Caterpillar.

Keywords

Liquidity, Current ratio, Quick ratio, Cash ratio, Caterpillar, Terex, Komatsu, Short-term debt, Receivables, Inventories

Keywords

Liquidity, Current ratio, Quick ratio, Cash ratio, Caterpillar, Terex, Komatsu, Short-term debt, Receivables, Inventories

Language used: English

Date on which the thesis was submitted / produced: 6. 5. 2016

Thesis defence

• Date of defence: 30. 8. 2016
• Supervisor: Petr Gurný
• Reader: Karolina Lisztwanová

VŠB - Technical University of Ostrava

Ekonomická fakulta

Bachelor programme / field:
Hospodářská politika a správa / Finance