A company’s financial health is the deciding factor of future growth. As humans, we rely on health checkups to improve and maintain our health. Same thing goes for businesses. Without maintaining proper financial health that company will not be around long afterwards. I want to begin by presenting and comparing Ford Motor Company’s income statement, balance sheet, and cash flow to determine the financial health of the company versus two of the company’s current competitors. Income Statement
Five different categories are covered on a company’s income statement. Those categories are Total Revenue, Gross Profit, Operating Income or Loss, Net Income, and Net Income Applicable to Common Shares. These categories are usually viewed quarterly or annually. The main purpose of the income statement is to show management as well as investors, whether money was lost or made during reported time periods. Total revenue is the price of the product times the quantity sold. Gross profit is revenue minus cost. Operating income or loss is negative income from operations. Net income applicable to common shares is bottom-line profit belonging to stockholders.
In the annual report starting January 1, 2010 and ending December 31, 2010, Ford Motor Company reported Total Revenue at $128,954,000 with Cost of Revenue as $104,451,000. That is a Gross Profit of $24,503,000. On that same day, General Motors posted Total Revenue at $135,592,000 and Cost of Revenue at $118,944,000. Gross Profit of $16,648,000. Honda Motor Company, which annual reporting started on April 1, 2010, and ended on March 31, 2011, reported Total Revenue at $107,829,000 with Cost of Revenue being $78,389,000. Gross profit of $29,440,000. Ford Motor Company’s operating expenses where relatively high when compared to General Motors and Honda Motor Company. Ford reported Operating Income or Loss of $6,658,000. The figure was determined after subtracting $18,061,000 from the gross profit and also included nonrecurring expenses of $216,000. General Motors reported Operating Income or Loss of $5,084,000 after subtracting expenses from Gross Profit with no nonrecurring expenses. Honda Motor Company reported Operating Income or Loss of $6,875,000 after subtracting from Gross Profit. Honda’s expenses also included $5,883,000 in research development. Neither, Ford Motor Company, or General Motors, invested in research development. I believe that is why Honda, according to the figures, profited more. The Net Income for Ford Motor Company was $6,561,000 after expenses were subtracted from Gross Profit. General Motors posted Net Income of $6,172,000. Net Income Applicable to Common Shares of $4,668,000 was less than the Net Income total because of Preferred stock and other adjustments. Honda Motor Company posted a Net Income of $6,444,000 after expenses. Balance Sheets
Reporting financial position is the primary purpose of balance sheets. Balance sheets show Assets, Liabilities, and Stockholder’s Equity. Just as the word “balance” means, the total assets equal net worth, plus total liabilities. Ford Motor Company, General Motors, and Honda Motor Company’s total current assets consist of cash and cash equivalents, short-term investments, net receivables, inventory, and other current assets. Cash equivalent refers to assets that can be converted immediately into cash. Ford Motor Company reported $14,805,000, General Motors reported $22,301,000, and Honda Motor Company reported $15,432,000 in cash or cash equivalents. Ford ($20,765,000) and General Motors ($5,555,000) were the only two of the three to report short term investments. Net Receivables are assets or money minus bad debts, that are owed to the company. According to the figures, Honda’s assets are much higher than the other two companies in this category. Honda would appear to be selling more products because of this figure. Inventory for Ford Motor Company is significantly lower than General Motors and Honda...