Each company must prepare financial statements to provide a comprehensive picture about its past performance and situation for the owners, the managers, the state and other stakeholders as well. In the case of enormous, international public limited companies like Ford and Microsoft these statements and data are public, so anybody can reach them through the internet. Moreover, we can also compute a lot of financial ratios based on these data. If we want to get an authentic frame about the firms, we have to know what these statement and ratios mean. In addition, it’s difficult for the companies that they want to give other picture about their financial status to the owners and shareholders and an other to the state, namely in the former case the firm is interested in showing high profit to retain the older and win newer investors, whereas in the latter case it wants to give a worse picture in order to pay as little tax as possible.
Below, we analyse the above mentioned two companies (Ford and Microsoft) for leverage, profitability and growth purpose with some ratios.
Ford Motor Co: As we can see in the income statement, the total net income was fluctuating yearly, until 2008 it was negative that means Ford’s expenses exceeded its revenues. Over the past four years, this amount was the least, in number -14,672.00 million $ in 2008, thank to the financial crises. So the in 2009 reached, in number 2,717.00 million $ net income rates a good result. As the total net income was negative or relative low, the ratios of profitability like ROE, ROA or ROIC, which give that how much percentage shares the net income of the equity, the assets or the capital. We can’t say that it’s good if these indicators are high, namely in 2006 ROE was more than 300%, in 2008 more than 80 %by Ford, because both the net income and the equity were negative, so in this case this high ratio meant problems, not... [continues]
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