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Ford Motor Company (Thorough Analysis) - Research Paper Example

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Ford Motor Company (Thorough Analysis)

An enormous manufacturing base of cars and large scale administration was initiated by the company by use of a clearly developed manufacturing series exemplified by a non-stationary line of assembly. By 1914 the methods came to be known as Fordism. In 2008, Tata Motors of India bought Ford’s earlier UK’s branches Land Rover and Jaguar. Starting 1999 to 2010 Ford had in its ownership the Swedish automaker Volvo (Wallace, 2003). Financial Ratios Analysis liquidity ratios 2010 2011 current ratios 0.855917595 0.955290702 Acid test Ratios 0.474514453 0.586053149 Activity ratios     Total Asset turnover 0.783024768 0.76403436 Inventory Turnover 17.65269562 19.2077614 No. of days Sales In A/R 0.001305108 0.576388481 No of Days Sales in inventory 0.000155202 0.052062288 Profitability ratios     Gross profit Margin 0.190013493 0.168195562 Operating Profit Margin 0.050847589 0.1484031 Net profit Margin -0.005218915 0.110285916 Earnings Per share -0.176362683 3.938155136 Return on Assets -0.00408654 0.084262229 Return on common Equity 1.048286604 0.997146838 Debt Ratios     Debt Ratios 1.003898304 0.915496669 Times Interest earned 1.162061118 1.959151433 Market Ratios     Price per earning ratio 0.001834862 0.001824818 Dividend yield 0 153 Dividend Payout Ratios 0 0.27919708 See the attached excel spreadsheet Liquidity Ratios The liquidity ratios calculated for the year 2010 and 2011 are shown in the table above. The calculations are on the excel spreadsheet attached. Liquidity ratios show the firm’s ability to settle short term liabilities out of the liquid cash. The type of liquidity ratios calculated include; current ratio and acid test ratio. The liquidity ratios must equal to 1 or more than 1. If it is 1.00 then it implies the short-term debts are fully settled with the liquid cash. If they are less than 1.00 then it shows that the available cash cannot settle the arising short term liabilities. From the calculations Ford Motor Company has a current ratio of 0.86 in 2010 which improved to 0.96 in 2011. Though there was an improvement in the current ratio, it is still less than one which shows the company’s dilemma in dealing with its short term debts. The available cash is not enough to settle the short term liabilities (Zane, Kane & Marcus, 2004). The acid test ratio as depicted from the calculations is also worth of discussion. In both years the acid test ratio was less than 1 which might be detrimental to the Ford Motor Firm. Though an improvement was noted from 0.47 to 0.59, the ratio was still below the threshold. Activity Ratios Activity ratios depict the degree of effectiveness of a company in using the resources available in a manner that can promote the growth of the company. The activity ratios derived above are total asset turnover which dropped from 0.78 to 0.76. This is an indication that the assets of the company were not utilized in a way that could realize enough returns. On the other hand the inventory turnover increased from 17.65 times to 19.20 times. This shows that the inventory of the firm was utilized effectively in raising good returns on the sales on the firm. Number of days in sales of A/R increased from 0.0013 to 0.58. This depicts that the collection period for the receivables increased from 2010 towards 2011. This is too risky for the firm as the company can end up being indebted by its customers. Lastly in regard to the number of days in s ...Show more

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Ford Motor Company (Thorough Analysis) Name of Instructor Name of Institution Ford Motor Company Background Ford Motor Company is a multinational automotive manufacturer based in America. Its headquarters are in Dearborn, Michigan in the suburb of Detroit…
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