Case: Deere & Company
Presented below is the SEC mandated disclosure of contractual obligations provided by Deere & Company in a recent annual report. Deere & Company reported current assets of $27,208 and total current liabilities of $15,922 at year end. All dollars are in millions.
Aggregate Contractual Obligations
The payment schedule for the company’s contractual obligations at year end in millions of dollars is as follows:
|
Total |
Less than 1 year |
2&3 years |
4&5 years |
More than 5 years |
|
|
Debt |
|||||
|
Equipment operations |
$2,061 |
$130 |
$321 |
$1,610 |
|
|
Financial Services |
19,598 |
8,515 |
7,025 |
$3,003 |
1,055 |
|
Total |
21,659 |
8,645 |
7,346 |
3,003 |
2,665 |
|
Interest on debt |
3,857 |
941 |
1,102 |
557 |
1,257 |
|
Purchase obligations |
3,212 |
3,172 |
26 |
9 |
5 |
|
Operating leases |
358 |
100 |
120 |
58 |
80 |
|
Capital leases |
29 |
3 |
6 |
4 |
16 |
|
Total |
$29,115 |
$12,861 |
$8,600 |
$3,631 |
$4,023 |
Instructions
(a) Compute Deere & Company’s working capital and current ratio (current assets 4 current liabilities) with and without the contractual obligations reported in the schedule.
(b) Briefly discuss how the information provided in the contractual obligation disclosure would be useful in evaluating Deere & Company for loans: (1) due in one year, (2) due in five years.