Discussion and 2 replies

1

Agenda

Trend Analysis

Financial Ratio Analysis

Return on Equity using DuPont Analysis

Recommendation

Future Improvements to Financial Stability

Trend Analysis

Unstable sales growth

Declining growth of -2.77% in 2019 and -18.45% in 2020

Cost of Goods Sold declined by similar margins

Higher wholesale volume in pickup trucks and SUVs

Favorable use of financing and investment strategies for controlling cash flow

Financial Ratio Analysis

Current ratio floating around 1.20

Quick ratio very close to 1.00 and lower than optimal

Days of Sales Inventory has increased with receivables turnover and inventory turnover both decreasing

Profitability issues: -3.47% operating margin and -1.01% net margin for past fiscal year

Return on Equity using DuPont Analysis

Drastic fall in ROE from 10.38% in 2018 to -4.00% in 2020

Main driver of this is Ford’s net profit margin falling from 2.29% in 2018 to -1.01% in 2020

Even with increased financial leverage, ROE is eroding rather than improving

Ford’s competitor Honda has more favorable ROE of 5.60%

Recommendation

The Company should look to the future for product trends and use those to drive business decisions and long-term planning

Invest in technology of autonomous vehicles for the future

Maintain brand integrity/positivity with pursuit of electric vehicles

Steps to Improve Financial Stability

Find ways to cut costs and decrease financial leverage – the Company is highly leveraged and paying additional for debt due to poor credit

When idling production, find a use for facilities rather than letting them go to waste

Keep pause on dividend until future cash flows are more accurately quantifiable and predictable