7 pages due by 2 days

Ford Motor Financial Ratios

By

Name:

Running head:FORD MOTOR

1

FORD MOTOR

1

Institution:

Introduction

The financial health and autonomy of an organization depend on profit generation operating costs, the redemption of loans, and growth in asset prices for the good of creditors must be measured to achieve total financial and operating quality, however, businesses must test their actual financial performance.

Liquidity ratios

a) Ford Current Ratio 

Current ratios for stable enterprises vary between industry and industry and are typically between 1 and 3. Ford’s current ratio is 3. The higher the current ratio, the more the firm will pay its shares. A ratio of less than 1 shows that, if they were due, the company could not pay off its obligations. While this shows that the company is not in good financial condition, it does not always mean that it would collapse since there are several options to get funding (Ford Motor Company financial analysis and rating, 2020).

b) Quick ratios

Ford’s quick ratio was 1.1 times, 1.12 in 2017, 1.08 in 2018, 1.05 in 2019, and only dropped by the remaining two years, as the ratio of current debt to current assets was minus the inventory in 2016. However, the liquidity of Ford motors over the four years is optimistic as their rapid proportion is all about the one (“How do the current ratio and quick ratio differ?”, 2019)

Profitability ratios

a) Operating profit margin

A percentage of profitability measured as a revenue-divided operating benefit. From 2017 to 2018, and from 2018, Ford Motor Co.’s operating profit margin declined (Enkhbayar, 2018).

b) Return on equity ratio

In general, the ratio depends on the market, investors, and competitors of the company; (Hargrave, 2020a). Overall, the ROE ratio of Ford was more than acceptable in 2016-2018 except in 2019.

Solvency ratios

a) Debt to capital ratio 

It measures this solvency ratio as full debt (including obligations for an operating contract) split into gross debt and shareholders’ equity (including lease liability). The equity-debt ratio of Ford Motor increased between 2017 and 2018, but substantially declined between 2018 and 2019 (Hargrave, 2020a).

b) Debt to equity ratio

It measures the ratio as gross debt divided by total equity. The debt-to-equity ratio of Ford rose between 2017 and 2018, but substantially cut down between 2018 and 2019 (Ford Motor Company financial analysis and rating, 2020).

Discussion

Ford is stronger financially than GM or Chrysler and needs no salvation funds, and Ford does not require getting its rivals an advantage (Bayou & De Korvin, 2008) The firm returns its capital return by demonstrating how much value a company produces by using its money owners. A high stock yield means that buyers have a high benefit rate. This ratio tells investors how efficiently their investment as they reinvest capital (Brealey et al., 2009). Ford reported a fair improvement in the capital in 2009, which was marginally higher than the industry standard in this sector.

Conclusion

On average, Ford’s 2019 company was financially successful. First by integrating separate assets into cost & debt payments without depending on cash as the basis of payments can display a clear sign of liquidity, as the cash available to Ford does not meet its obligations. Second, the activity of the care sector is significantly higher in terms of stocks, claims, and total assets, provided that it is capable of turnover more times each year for its inventories, claims, and total assets.

References

Enkhbayar, A. (2018). Ford Motor Company's Financial Analysis.

Brealey, R. A. , Meyers, S. C. , & Marcus, A. J. (2009). Fundamentals of Corporate Finance (6th ed). New York: McGraw-Hill

Bayou, M. E., & De Korvin, A. (2008). Measuring the leanness of manufacturing systems—a case study of Ford Motor Company and General Motors. Journal of Engineering and Technology Management, 25(4), 287-304.

“How do the current ratio and quick ratio differ?” (2019). New York: Newstex. Retrieved from http://adu-lib-database.idm.oclc.org/login?url=https://search-proquest-com.adu-lib-database.idm.oclc.org/docview/2251448765?accountid=26149

Ford Motor Company (F) financial analysis and rating. (2020, May 2). Retrieved January 26, 2021, from https://www.readyratios.com/sec/F_ford-motor-co

Hargrave, M. (2020a, April 12). Return on Assets—ROA. Retrieved from Investopedia: https://www.investopedia.com/terms/r/returnonassets.asp