The average inventory holding period is estimated using the following formula (the denominator is referred to as the inventory turnover ratio):

Average Inventory Holding Period = 365 days / (cost of sales / average inventory)

Use data from the financial statements to estimate the average inventory holding period for Caterpillar and CNH Global for fiscal 2006 and 2007. Calculate the ratios for both companies with FIFO-based numbers. Additional information: CNH Globals inventory balance for fiscal 2005 was $2,466. Evaluate how well Caterpillar manages its inventory relative to its competitor. Now recalculate the average holding period for Caterpillar using their as-reported (LIFO) numbers. Do you come to a different conclusion about their inventory turnover?

STATEMENT 1 Caterpillar Inc Consolidated Results of Operations for the Years Ended December 31 (Dollars in millions except per share data) 2007 2006 2005 Sales and revenues: Sales of Machinery and Engines Revenues of Financial $41,962 $38809 S34,006 2,996 2,648 2,333 44,958 41,517 36,339 Total sales and revenues Operating costs: Cast of goods sold Selling, general and administrative expenseS Resaarch and davelopment expenses Interest expense of Financial Products Other operating expenses 32.626 29.549 26.559 3,821 3,706 3190 1,404 1,347 1,084 1,132 1,023 76 955 40,037 365 32 555 1,054 971 Total operating costs Operating profit ,921 4,92 3,784 Interest expense excluding Financial Products. Other income (expense) 288 274 260 320 214 37 Consolidated profit before taxes 4,953 486 3,901 1,485 4051,120 Provision for income taxes Profit of consolidated companies Equity in profit loss) of unconsolidabed atfiliaed companies.... 73 81 73 Profit 3,541 353 2854 Profit per common share Profit per common share diluted" Weighted-average common shares outstanding (millions) $ 5.55 537 S 4.21 $ 5.37 $ 517 S 4.04 -Basic -Diluted" 659.5 63 705.8 s 1.38 $1.15 98 Cash dividends declared per common share o Diluted by assumed xercise of stock-based compensation awards, using the treasury stock mechod