Assignment Week 3 Ford Motors
Ford Motors Case Study
Celyn S. Pappas
FIN/571
January 19, 2015
Kenneth Baker
Ford Motors
Being able to highlight and define the most relevant financial ratios and how to interpret the meaning is important for analyzing financial statements and the financial health of an organization. There are five financial ratio categories, and this essay will explore 4. First is liquidity, which will establish if the organization has the ability to pay its bill if operating cash is able to pay short-term obligations. Next is efficiency. Efficiency helps analyze how quickly an organization is converting its inventory and accounts receivables into cash. How an organization uses debt to fund long-term investments is found by computing leverage ratios. Lastly, to determine how a company uses its assets to generate sales and manage its operations, investors rely on profitability ratios.
Liquidity
The formula for calculating your liquidity ratio (Quick Ration) is the current assets divided by current liabilities. The standard for a healthy business is 2, which means that it has twice as many assets as it does liabilities ("Investopedia", 2014). Looking at Fords Quick Ration for the past few years, it ranges from a high of 2.85 to a low of 1.25. Ford’s most recent Quick Ratio result for 2013 is 1.94. This ratio shows that there at 1.94 times assets as there are liabilities ("Morning Star", 2014). The "Csimarket.com" (2014) website compared 2014 Q3 to the industry standard at 2014 Q3 and Ford Motor credit far exceeds the industry standard at 1.63 compared to .63.
Efficiency
Efficiency ratio measures an organization’s ability to turn resources into revenue. Note, it is best the organization have a lower ratio. Below are efficiency ratios for Ford Motor ("Morning Star", 2014). Their ratios over the past were steady accept for 2010 where the days outstanding were significantly higher than 2011-2013.
Efficiency
2004-12
2005-12
2006-12
2007-12
2008-12
Celyn S. Pappas
FIN/571
January 19, 2015
Kenneth Baker
Ford Motors
Being able to highlight and define the most relevant financial ratios and how to interpret the meaning is important for analyzing financial statements and the financial health of an organization. There are five financial ratio categories, and this essay will explore 4. First is liquidity, which will establish if the organization has the ability to pay its bill if operating cash is able to pay short-term obligations. Next is efficiency. Efficiency helps analyze how quickly an organization is converting its inventory and accounts receivables into cash. How an organization uses debt to fund long-term investments is found by computing leverage ratios. Lastly, to determine how a company uses its assets to generate sales and manage its operations, investors rely on profitability ratios.
Liquidity
The formula for calculating your liquidity ratio (Quick Ration) is the current assets divided by current liabilities. The standard for a healthy business is 2, which means that it has twice as many assets as it does liabilities ("Investopedia", 2014). Looking at Fords Quick Ration for the past few years, it ranges from a high of 2.85 to a low of 1.25. Ford’s most recent Quick Ratio result for 2013 is 1.94. This ratio shows that there at 1.94 times assets as there are liabilities ("Morning Star", 2014). The "Csimarket.com" (2014) website compared 2014 Q3 to the industry standard at 2014 Q3 and Ford Motor credit far exceeds the industry standard at 1.63 compared to .63.
Efficiency
Efficiency ratio measures an organization’s ability to turn resources into revenue. Note, it is best the organization have a lower ratio. Below are efficiency ratios for Ford Motor ("Morning Star", 2014). Their ratios over the past were steady accept for 2010 where the days outstanding were significantly higher than 2011-2013.
Efficiency
2004-12
2005-12
2006-12
2007-12
2008-12