Financial Research Paper

Topics: Balance sheet, Asset, Ford Motor Company Pages: 8 (1449 words) Published: October 29, 2013
Date: Sunday, October 27, 2013

To: Andrew Foertsch

From: Michael Torres

Subject: Financial Statement Analysis of Ford (2011-2012)
Ford Motor Company (Ford) is an American multinational auto company founded by Henry Ford. The company owns both Ford and Lincoln branded luxury cars, mainly selling Ford automobiles and commercial vehicles. It has a wide range of products covering cars, trucks, and utility vehicles. Ford is minority controlled by the Ford family and listed on the New York Stock Exchange (NYSE: F) this article is a general and brief analysis of Ford Company’s financial performance in 2011 and 2012. More specifically, we’ll analyze the changes of data from balance sheets and income statements between the years 2011 to 2012 and combine the research to get the overall conclusion of why the data will change and is it good or bad. Though all businesses experienced the economic recession that began in 2008 which had some effect upon the operations of Ford, it did not affect the report to compare the ratio difference of 2011 and 2012. Therefore, we did not count 2008 recession as one of the reason that makes a difference between ford’s economic performances between these two years. Here is the table of some significant ratios for 2011 and 2012: Table

Income Statement
2011
2012
Total Revenue
$136,264
$134,252
Cost of Sales
$113,345
$112,578
Selling, Administrative, Etc.
$11,578
$12,182
Financial Services
$3,614
$3,115
Total Cost and Expenses
$128,504
$127,961
Income Before Income Taxes
$7,720
$8,681
Net Income
$5,664
$20,222

Table
Equity Ratio:
10.89%
Total Liabilities:
10.83%
Profit Margin:
4.20%
Net Incomes:
14.80%
ROI
9.70%
Net Income After Tax:
23.10%
Inventory Turnover
0.182%
Equity Sales:
0.231%
Acid-Test Ratio:
$0.95
Inventory:
$0.97
Current Ratio:
$0.84
Current Assets:
$0.86

Let’s look at those data’s at an overall level. Almost all of the ratios went up except for Equity Ratio. This is a leverage ratio which measures the degree to which a firm relies on borrowed funds in its operation. It is calculated by “total liabilities” divided by “equity ratio”, any figure above 100 percent shows a firm has more debt than equity. Because the “debt to owner’s equity” ratio of both years is lower than 100%, it implies that lenders and investors may perceive Ford has enough equity to meet the short- term business needs, so lower the figure, the better. Also, because a large part of owner’s equity faces depreciation, the systematic write-off of the cost of tangible assets over its estimated useful life over time, especially in an automobile company, this indicates Ford owned more properties (tangible goods) in 2012 than it has in 2011. From the overview data, we can see Ford kept improving each of the ratios in a low pace. The fastest one is “return on equity”, or we can call it return on investment, which concerns Ford’s current and potential investors, indirectly measures risk by telling us how much a firm earned for each dollar invested by its owner, or, for a public company like ford, the stockholders. The higher the figure, the better .and figure over 15 percent is considered a reasonable return. In this case, because the ROI increased from 9% to 23%, the dividends shared to stakeholders increased significantly, so Ford would be very attractive for potential investors and comfortable to keep old investors. WE came up with a challenge when WE saw the ROI (return on the owner’s equity) in 2011 was only about 9% our question is what makes a powerful and comparatively stable company had a lower than average ROI in 2010. Then WE did some research and found out that Ford has sold vehicles under a number of other marques (brand names) during its history. The Mercury brand was introduced by Ford in 1939, continuing in production until 2011, when poor sales led to its discontinuation. Therefore, it could be a factor led to poor financial condition. But Ford...

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Motors, Tesla. Tesla Motors - Annual Report. 27 February 2012. 27 October 2013.
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StreetAuthority. Ford Motor Company (F) Vs. Tesla Motors Inc (TSLA)... Which Stock Should You Buy? 21 October 2013. 27 October 2013.
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