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Financial Ratio Analysis

The financial year ending 2018 saw Deere & Co. register a return on assets (ROA) of 3.38 compared to 2018, the ROA in 2019 was 4.46, and the year ending 2020 was 3.67. Regarding John Deere’s ROE (Return on Equity), the company had 20.10 in 2018, 28.53 in 2019, and 21.23 in 2020. Lastly, John Deere’s ROI for the last three financial years is as follows: 2018 (6.15), 2019 (7.82), and 2020 (6.02) (Macrotrends.net, 2021).

            Deere’s liquidity ratios comprise quick ratio and current ratio. In 2018, Deere & Co. had a quick ratio of 0.39, in 2019, it was 0.4, and 2020 it was 0.52. Regarding the current ratio, the company had 0.69 in 2018, 0.69 in 2019, and 0.77 in 2020 (Readyratios.com, 2021). The ratios are below meaning it has less quick assets than the current liabilities.

            Debt management ratios comprise LT debt to equity, total debt to equity, and interest coverage. Regarding LT debt to equity, Deere had 2.41 in 2018, 2.65 in 2019, and 2.53 in 2020. When it comes to total debt to equity, Deere had 3.74 in 2018, 3.97 in 2019, and 3.56 in 2020. In terms of interest coverage, Deere had 3.38 in 2018, 3.79 in 2019, and 4.11 in 2020 (Macrotrends.net, 2021).

Additionally, asset management ratios comprise total asset turnover, receivables turnover, inventory turnover, and accounts payable turnover. Total asset turnover in 2018 (0.55), 2019 (0.55), and 2020 (0.48). Receivables turnover in 2018 (7.79), 2019 (7.12), and 2020 (7.17). Inventory turnover in 2018 was 5.13, in 2019 (4.46), and 2020 (4.35) (Investing.com, 2021). Accounts payable turnover in 2018 was 19.64, in 2019 (22.25), and 2020 (19.6). Per share involves both cash flow per share and book value per share. Cash flow per share in 2018 (5.66), 2019 (10.61), and 2020 (23.93). Book value per share in 2018 (35.45), 2019 (36.45), and 2020 (41.25) (Readyratios.com, 2021).

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Part 2

            An analysis of ROA demonstrates a fluctuating trend. Nonetheless, the company had a positive ROA over the three years, which means it is profitable relative to its total assets, thus gives an idea of how efficient the management is in generating earnings (Hickman et al., 2013). A close examination of the ROE trend is reducing, but remains positive. However, the ROE gives a signal for the loss of competitive advantage in the long run. ROE is a measure of the profitability as it relates the invested capital.

The ROI for the company is positive, but is fluctuating, thus demonstrates that the total returns are more than the any associated costs. The fluctuating ROI also signals Deere’s investors to determine when to make more investments (Readyratios.com, 2021). Debt management ratios are used to measure financial leverage, and the company’s ability to avoid financial challenges in the long-run.

Ratios	Strengths	Weaknesses
Profitability ratios	✓
Liquidity ratios		✓
Debt management ratios		✓
Asset management ratios	✓
Per share	✓

            The overall financial strength of the company based on the above ratios is in the profitability ratios, especially on the return on assets (ROA), given that it has been profitable relative to its total assets making the management more efficient (Hickman et al., 2013). Considering the above ratios, the strength of Deere & Co. is based on the fact that the debt management ratios is increasing (Readyratios.com, 2021). On the other hand, the weakness of the company is based on the decline of the turnover ratios.

Company’s Overall Ratio Performance	Strong	Neutral	Weak
Profitability Ratios	✓
Liquidity Ratios		✓
Debt Management Ratios	✓
Asset Management Ratios			✓
Per Share		✓

Part 3

Ratios	ROA	ROE	Gross Margin	Net Margin	Quick Ratio	Current ratio	Long-term debt to equity	Total debt to equity	Interest coverage ratio	Asset turnover	Inventory turnover
AGCO Corp.	5.24	14.60	22.49	4.67	0.59	1.30	0.42	0.54	39.98	1.12	3.50
Alamo Group, Inc.	4.86	9.45	25.11	4.87	1.60	3.20	0.43	0.46	6.44	1	3.50
Arcosa, Inc.	4.30	5.77	19.74	5.51	1.12	2.14	0.13	0.13	14.88	0.78	5.55
Arts Way Manufacturing Co. Inc.	-11	19.33	10.71	-9.39	0.40	1.67	0.27	0.52	–	1.17	2.42
Deere & Co.	3.73	22.66	29.80	7.74	0.52	0.77	2.53	3.56	4.11	0.48	4.35
Growlife, Inc.	-151.38	–	42.57	-91.13	–	0.19	–	–	–	1.66	6.87
Lindsay Corp.	7.19	13.60	32.14	8.14	2.20	3.40	0.39	0.45	19.34	0.88	3.27
Mueller (Paul) Co.	-24.49	-95.64	30.23	-1.27	1.13	1.63	0.60	0.67	2.99	19.27	85.87

            In the most recent year, 2020, Deere & Co.’s ratio performance compared to the industry competitor ratios of AGCO Corp. Arcosa, Inc., Growlife, Inc., and Lindsay Corp., is higher, which means Deere & Co. is performing better. For instance, ROA (3.73) and ROE (22.66), including the net margin (7.74) and gross margin (29.80) for Deere & Co. is higher (Investing.com, 2021). This means Deere & Co. is performing better financially compared to other competitors as above.

Part 4

            Compared to the industry based on the performance ratios, Deere & Co.’s overall financial performance is better than average, especially when analyzed using the last three financial years. The most important ratios to determine the extent of the financial performance is the profitability ratios such as ROA, ROE, and ROI (Hickman et al., 2013). For instance, given the profitability ratios stated above, the company had a positive ROA over the three years, which means it is profitable relative to its total assets.

The ROE trend is reducing, but remains positive. It gives a signal for the loss of competitive advantage in the long run. Lastly, ROI for the company is positive, but is fluctuating, thus demonstrates that the total returns are more than the any associated costs (Investing.com, 2021). The overall ratio performance of Deere & Co. is 23.40 compared to the industry’s average of 20.12, which means it is performing better than their competitors.