Throughout this course, you have been researching and analyzing various financial statements for Deere & Company. For this Final Paper, you will culminate your analysis with an in-depth comparison of...

Introduction
This report deals with the companies Deere and Company and Caterpillar Inc. Comparison has been tried to built up to decide on which is the better company to invest in. We started with financial statement analyses including cash flow statement, Balance sheet and Income statement and tried to draw a contrast between the two companies. After dong the fundamental analysis we also tried to analyze their global strategy. Later we decided and proposed which is a better company to invest in.
Analysis
Financial Statement Analysis
Cash Flow Statement Analysis:
Deere & Company:
In 2018, the company was making losses of $534.7 Million while in 2019, the company made profits of $499.6 Million.
Cash flow from Operating Activities:
Company’s cash flow from operating activities is negative in both the years ($1650.7 Million (2019) and $1296.0 Million (2018)), which means that the operating expenses are higher as compared to revenue.
Provision for depreciation and amortization:
In company’s cash flow from operating activities, company’s provision for debt and amortization is a huge amount which is almost equal to company’s net income.
Current assets and Current liabilities:
There is a significant increase in the amount of trade receivables from $34.9 Million in 2018 to 507.3 Million in 2019 which is almost 15 times. This means that the cash is blocked in receivables. Trade receivables have been deducted from cash flow from operating activities since they don’t affect any cash flow.
Company’s inventory have increased by $157.1 Million from 2018 to 2019 but the Trade Payables have gone down by $217.6 Million. This implies that company has made cash payments to trade payables leading to cash outflow.
Cash flow from Investing Activities:
Company’s cash flow from investing activities in 2019 is positive i.e. $968.6 Million compared to 2018 which is negative of ($4096.3) Million.
The major reason behind his is the acquisition cost incurred by company in 2018 worth $5129.6 Million. Company’s collection of receivables (excluding sales) remains almost stable in both the years at approx. $5000 Million and cost of receivables also remains stable at $4000 Million. Company has purchased some marketable securities, equipment’s and leases in both the years.
Company’s major inflow is through the receivables and major outflow is the cost incurred for receivables excluding the sales receivables. Although one of the major outflow in 2018 was the acquisition conducted by the company.
Cash flow from Financing Activities:
Cash flow from financing activities is positive in 2019 i.e. $402.8 Million which was negative ($231.0 Million) in 2018. The major reason is due to increase in the short term borrowings of the company.
Company has gone for both short term and long term borrowings, Increase in the amount of long term borrowings is as much as $2211 Million in 2019. Company has also made payments towards long term borrowings in both the years, almost worth $1800 Million in both the years. Common stock has been issued but the proceeds in 2019 were lower compared to that in 2018 by $92 Million. In 2019 company has repurchased the common stock worth $143.9 dollars.
Company’s major inflow is through the proceeds from long term borrowings an=d the major outflow is the payment of long term borrowings.
Caterpillar Inc.
Cash flow from Operating Activities:
Company’s operating cash flow has increased to $1121 Million in 2019 from $935 Million which is an increment of almost 20%
Non cash Items:
Depreciation and amortization expense is huge for the company at around $600 Million in both the years which is more than 30% of the net profit.
Current Assets and Current Liabilities:
There has been decrease in the trade receivables which means that company is able to receive cash for its sales while there has been increase in the trade payables implying that company is purchasing inventories on credit leading to less cash outflow.
Company’s operating cash flow are positive implying that company is able to receive cash for its sales and cash is not blocked, while the expenses are less for the company.
Cash flow from Investing Activities
Cash flow from investing activities is negative implying company is investing its money especially in financial receivables. Although there has been decrease in the amount used in investing activities from 2018 to 2019 by almost 77%.
Cash flow from Financing Activities
Company’s cash flow from financing activities is negative – ($1675) Million in 2019 and ($538) Million in 2018. The amount is negative due to huge dividend payments and Payment of debt obligations.
Comparison:
Comparing the Cash flow statements of both the companies we can say that Deere and Company has high cash outflow in operating expenses leading to negative or low cash flow from operating activities and the amount is blocked in Trade Receivables While Caterpillar Inc is having positive cash from operating activities.
Deere and Company is receiving more amount in Investing...