Business Analysis- Ford Motor Company

2405 words 10 pages
Business Analysis Part III

Nancy Holly

MGT/521 Management

January 27, 2012

Jim O’Keeffe, Facilitator

Abstract A financial analysis of Ford Motor Company’s (Ford) statements will identify their solvency in today’s automobile market. Elements such as liquidity, leverage, profitability, and activity ratios will demonstrate Ford’s financial health and stability. A further assessment of their technological advantages, global strategies, and benchmarking analysis will indicate the future prognosis of this company.
Business Analysis Part III: Ford Motor Company
Ford Motor Company: Strategic Initiative
Liquidity Ratios Managers frequently use liquidity ratios to measure a company’s financial status. Banks and/or
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A look at Ford’s September 2011 balance sheet and 2010 Income Statement shows the following about their inventory turnover (“,” 2010):
Inventory turnover = Costs of goods sold/Average inventory
Inventory turnover = $99.45B/$5.92B = 16.8 times
Financial Health of Company in Comparison to General Motors
Ford vs. General Motors A review of General Motors (GM) 2010 Balance Sheet revealed the following information about the company’s liquidity: Current ratio = Current assets /Current liabilities Current ratio = $53.05B/$101.74B = $0.52 [Current assets for every $1 of current liabilities] Acid-test ratio = Cash +Accounts receivable + Marketable securities /Current liabilities Acid-test ratio = $22.3B + $8.7B + no record /$101.74 = 0.3 [0.5 – 1.0 is usually considered satisfactory, but bordering on cash flow problems] GM’s 2010 current ratio test revealed that the company had $0.52 current assets for every $1 of current liabilities, and that an acid-test ratio of 0.3 revealed that GM’s cash flow assessment was favorable (“,” 2012). A review of GM’s 2010 Balance Sheet revealed the following information about the company’s debt and ability to pay short-term debt: Debt to owners’ equity ratio = Total liabilities/Owners’ equity $101.74B/$37.16B = 274% GM’s debt to owners’ equity ratio of 274% shows that they have


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