Eaton Company Financial Position - Essay Example

These factors explicate my enchantment with the company. In effect, the expose elucidates the company’s 2010 report using economic principles learned in class.

Joseph Oriel Eaton and Viggo Torbensen established a small machine shop in Bloomfield, New Jersey in 1911. The shop manufactured heavy-duty truck axles supplying them to the expanding automotive industry. In 1917 however, by which time production had soared to 33,000, Eaton sold the company to Republic Motor Truck Co., the largest truck maker in the country. Eaton appeared again in the industry in 1922 by buying back his original company from Republic Motor Truck Co. In this regard, the company became Eaton Axle and Spring Co. one year later. Efficaciously, the company weathered the Great Depression by acquiring several companies that were approaching bankruptcy.

By the late 1930s, President Roosevelt's New Deal program stimulated industrial growth. In effect, demand for products from Eaton Manufacturing Company--a name change registered in May 1932--increased slowly and steadily. Moreover, the United States' engagement in World War II made Eaton the primary manufacturer of vehicle parts. In effect, the company produced a variety of items making its contributions to the war effort. Currently, Eaton Corporation is a diversified power management company with a workforce of over 70,000 people. In addition, the country operates in more than 50 countries and sells its products to almost 150 countries. This year marks a hundred years of the company’s operations (Eaton).

In the year 2010, Eaton Corporation made sales worth $11.9 billion. Further, the net income attributable to the company’s common shareholders was valued at $929 million. The company’s total assets were $ 17.252 billion. On the other hand, the total current liabilities were $3.233 billion while the total non-current liabilities were $6.616 billion; in effect, the total liabilities were valued at $9,849 billion. Moreover, Eaton shareholders’ equity was $7,362 billion. In effect, the earnings per share were $2.73 while the dividends paid per share were $1.08 (Eaton).

During 2009 and the latter part of 2008, the management noted a decline in demand for the company’s products and sales due to the recession in the global economy. In effect, the company responded by implementing cost-cutting measures such as a 17% reduction in the full-time workforce amongst other measures. In this regard, these measures were to ensure the company remained competitive in the marketplace. In addition to a reduction of the workforce, Eaton reduced its short-term debt significantly; in this regard, the company used cash generated from operating activities and long-term borrowings. With these measures in place, the company’s net sales increased by 16% in 2010 compared to 2009. In effect, the gross profit increased in 2010 by 32% compared to 2009 while there was a reduction in liabilities. In this regard, this marked an improved year in terms of profits and sales while the company reduced liabilities. With strong demand for its products over the world, investment in growth is the management’s main agenda (Eaton).

Ernst & Young LLP was the auditing firm in charge of preparing the company’s financial statement. In effect, the results were impressive since the company prepared the statement by the COSO criteria, and generally accepted accounting principles. The statement explained the 2010 transactions concerning those in 2009. In effect, the statement explains Eaton’s strong financial position, in all respects. Hence, Ernst & Young LLP provided an expert opinion and a good assessment of Eaton’s financial position (Eaton).

After a review of the annual report, I am very confident Eaton Company is a good investing option. Despite the economic recession experienced, the company has been experiencing remarked growth for the last 5 years. In addition, diversification enhances its future profitability. Moreover, Eaton has had a positive net income and earnings per share. I must say the strategy to attain 10% sales and 15% earnings growth is impressive. Furthermore, Eaton invests aggressively in developing new power technologies. In effect, the company was able to maintain profitability in 2010 despite the weak economic environment due to these strategies. Hence, their sales, operating profit, operating margin, and net income improved during the second, third, and fourth quarters of 2010. In this regard, I strongly recommend investing in Eaton Corporation (Eaton). Read More