Problem 1 Deere & Company manufactures, distributes, and finances a full range of agricultural equipment; a broad range of industrial equipment for construction, forestry, and public works; and a variety of lawn and grounds care equipment. The company also provides credit, health care, and insurance products for businesses and the general public. Consider the following information from the Deere & Company Annual Report: (in millions) Year 1 Year 2 Year 3 Sales $12,791 $13,822 $11,751 Year 4 $13,137 Cost of goods sold 8,481 9,234 8,178 8,936 Gross margin 4,310 4,588 3,573 4,201 Operating expenses 2,694 2,841 3,021 3,236 Net operating income $1,616 $1,747 $552 $965 3 4 15 16 1. Prepare a statement showing the trend percentages for each item using Year 1 as the base year. 2. Prepare a horizontal analysis including the dollar and percent change for Year 4. 3. Prepare a vertical analysis showing the common size percent for years 3 and 4. 4. Comment on your analysis. 17 a. Trend Percentages 18 19 Sales 20 Cost of Goods Sold 21 Gross Margin 22 23 Operating Expense Net Operating Income 24 Year 1 (show percentages only for Trend Analysis) Year 2 Year 3 Hint? Year 4