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Massy Ferguson

  • Date Submitted: 09/20/2011 05:57 AM
  • Flesch-Kincaid Score: 59.2 
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1) Operating margin is the ratio of operating profit/sales. This means how much a company earns before interest   and taxes   from each dollar of sales.
From exhibit 6 we get:
Operating profit/sales 1980 1979 1978 1977 1976
Massey Ferguson -4.44% -1.01% -4.55% 2.74% 4.55%
International Harvester agricultural division -0.04% 14.40% 12.25% 0 0
Deere & Company
8.59% 11.43% 12.92% 13.40% 13.98%

From the table it is clear that Massey Ferguson in 1980 lost 4.44 per $ 100 revenue. International Harvestor agricultural divison broke more or less even: a tiny amount was lost in 1980.
Deere & Company earned 8.59 per $ 100 in 1980.
Net Profit Margin is the ratio of net income to revenues: Net Income/Total Sales. This ratio shows the net profit available to equityholders
From exhibit 6 we get:
Net Profit Margin 1980 1979 1978 1977 1976
Massey Ferguson -7.19% 1.24% -8.77% 1.17% 4.25%
International Harvester agricultural division -6.29% 4.40% 2.80% 3.41% 3.15%
Deere & Company
4.17% 6.30% 6.37% 7.09% 7.71%

From the table it is clear that in 1980 that the fraction amount of dollars available to shareholders is the lowest for Massey Ferguson.   The Massey Ferguson shareholders lose money. The Net Profit Margin for Massey Ferguson is the lowest in all years except for 1976.
An explanation for this may be found in the Total debt/capital ratio: in 1980 for example Massey Ferguson had a Total debt/capital ratio of 80.85%. International Harvester had a Total debt/capital ratio of 53.56% and Deere & Company had a Total debt/capital ratio of 40.28%. In addition the ratio of short term debt to total debt was much higher for Massey Ferguson. Given the huge amount of short term debt Massey Ferguson often had to refinance.
Interest coverage: is the ratio of the company’s income to its interest payments. When this ratio is high it indicates that the firm is earning much more than it has to pay its required interest payments.
In this case the interest coverage is defined...

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