Strategic Initiative Paper

Michael Miranda

Nicole Melo

Shante Brown

Sherine Petgrave

Financial ratios provide a platform to measure the performance of a company against other firms within and even without an industry. It enables for comparison between firms of different sizes in the market. In this paper provides an analysis of General Motors against its competitors in the motor industry. General motors company is assigned the SIC Code 3711 (Motor Vehicles & Passenger Car Bodies).

Key Financial Ratios for General motors company

Financial ratios range from liquidity ratios, solvency ratios, profitability ratios, activity ratios, gearing ratios, etc. The table below shows annual financial ratios for General Motors Company based on 2014 fiscal year annual data.

Total asset turnover 0.91

Debt-to-equity% 0.96

Current ratio 1.27

A current ratio of 1.27 shows that the management is doing a great job at managing they don’t maintain too much instead o investing it and also not too little to an extent that they are unable to meet their current obligations. The company’s profitability ratios mainly fall above the industry average; this is a good sign that the firm is actually working towards its profit maximization objective. The debt-to-equity ratio which is currently at 0.96 is somewhat is less than that of the industry average, indicating that the debt level management has had successful efforts. Despite the concerns, the company has maintained a strong and firm financial position and is most likely to emerge as the industry leader for the production of motor vehicles and its accessories. The interest coverage is currently above the industry average and therefore interest on debt is adequately covered by the incomes made. The profit margin currently falls below the industry average and the management should be concerned and look into ways of improving on this. A debt to equity ratio of 0.96 means that the company’s assets are greatly financed on equity than they are on debt, this is a positive sign as there is less gearing as compared to other firms in the motor Industry.

REFERENCES