Ford Motor Financial Ratio Analysis
A well formulated financial ratio analysis report helps investors to quantify a company’s financial strengths and weaknesses and potential risks and opportunities and identify the company’s financial position. Using financial ratio analysis as a tool in conjunction with other business evaluation processes, and other company factors, is beneficial for the investors (Brealey, Meyers & Marcus, 2009).
The following report will provide the investor with a clear picture of the company’s current status as well as future projection in order to demonstrate investment opportunities. Specifically, this report examined xxx Company's financial ratios and other factors using a trend table over the past five years.
Return on assets (ROA) measures company earnings in relation to other resources such as shareholder’s capital plus short and long-term loans (Brealey et al., 2009). Return on assets also reports the profits a company generates for each dollar in assets and measures the intensity of the business’s assets. Specifically, lower per dollar profits results an increase of asset intensity for the company. Ford is asset intensive because this company mortgaged its assets in 2006 in order to raise $24.5 billion. Additionally, money has been reinvested into the company, which has generated earnings. In 2009 Ford also requested a one billion dollar line-of-credit from the government and a $5 billion loan from the Department of Energy in order to develop both hybrid and battery powered vehicles and retool plants to produce smaller cars. Compared to the industry index, Ford is 0.7% higher than the industry average in this area. In fact, Ford was in a better financial position than GM or Chrysler and did not need bailout money nor did Ford want their competitors to gain the upper hand (Ford Motor,2010)
Return on equity measures a company’s profitability by revealing on the balance sheet how much profit a company generates using the money shareholders have invested. A
The following report will provide the investor with a clear picture of the company’s current status as well as future projection in order to demonstrate investment opportunities. Specifically, this report examined xxx Company's financial ratios and other factors using a trend table over the past five years.
Return on assets (ROA) measures company earnings in relation to other resources such as shareholder’s capital plus short and long-term loans (Brealey et al., 2009). Return on assets also reports the profits a company generates for each dollar in assets and measures the intensity of the business’s assets. Specifically, lower per dollar profits results an increase of asset intensity for the company. Ford is asset intensive because this company mortgaged its assets in 2006 in order to raise $24.5 billion. Additionally, money has been reinvested into the company, which has generated earnings. In 2009 Ford also requested a one billion dollar line-of-credit from the government and a $5 billion loan from the Department of Energy in order to develop both hybrid and battery powered vehicles and retool plants to produce smaller cars. Compared to the industry index, Ford is 0.7% higher than the industry average in this area. In fact, Ford was in a better financial position than GM or Chrysler and did not need bailout money nor did Ford want their competitors to gain the upper hand (Ford Motor,2010)
Return on equity measures a company’s profitability by revealing on the balance sheet how much profit a company generates using the money shareholders have invested. A
References: Brealey, R. A., Meyers, S. C., & Marcus, A. J. (2009). Fundamentals of Corporate Finance (6th ed). New York: McGraw-Hill. Ford Motor Company. (2010). Retrieved from http://www.ford.com The North America Automotive Sectors. (2006). A Company and Industry Analysis. Industry Report - Automotive. Retrieved from http://industry.mergent.com