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Running head: FINANCIAL ANALYSIS

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FINANCIAL ANALYSIS

Financial Analysis

Argosy University Online

Module 1 Assignment 3

Katrina Caver

Argosy Online University states, “Finance is the study of the acquisition and disposal of money and financial assets, central to all organizations. When these organizations accurately apply generally accepted accounting and finance principles, their financial statements will reveal the firm’s performance,” (2012). Financial analysis is a very important measuring tool for determining a company’s stability. It analyzes the status of a company from time to time, whether it is quarterly or yearly. Many companies create an analysis report for the purpose of keeping financial status updated and allow managers to make proper changes as needed to improve managing finances, which is part of its planning process. The planning process includes planning for short-term (less than five years) and long-term (more than five years).

Planning helps managers identify problems and assist managers by allowing them to focus on solutions to solve them. It also helps grant that while meeting goals for improvement, it gives manager an idea that employees are all on the same page to meeting goals. As (Argosy University Online, 2012) mentioned, budgeting is usually used for short-term that allows managers to be evaluated and make sure that they are conducting business for the company properly and be able to make the appropriate changes as needed before it’s too late, while strategic planning is used for long-term that can help managers allocate the essential resources and achieve long-term goals. Yes, without planning for short-term and long-term, a company can fail.

Ratios, including liquidity, asset management, and financial leverage, profitability, and market value are used for financial analysis reporting. A profitability ratio is a measure of how profitable the business is and used to measure a company's performance. For a manager to know whether profits increased from one time period to the next time period, it is very crucial for the company as a whole. This allows a manager to take information gathered from analysis and be able to make adjustments that would be beneficial to the company. There is a general decline in gross margin thus the company’s profitability on goods and services are declining. Also, there is a rise in operating margin, which implies that the company spends more in production than in the previous financial years.

As a result, profits decrease. However, there is a steady upward trend of net profit margin; the company is considered to be in good standing. The liquidity ratio is a mathematical means of determining the company’s ability to pay its short-term debts. Anytime a company, as well as an individual is able to payoff any debts in a short period of time prove that managers are meeting the budget and not overspending. Current ratio is the most significant of the 3 methods. From the calculations, there is an improvement in liquidity of the company and therefore be described as a positive gain. The company is performing quite well compared to other companies in the market such as the apple company. The reviewing of Ford Company’s balance sheet and Income Statement yielded the results as displayed in the chart below.

RATIOS	YEAR
	2013	2012	2011
PROFITABILITY RATIO i. Gross Margin ii. Operating Margin iii. Net Profit Margin	12.8% 2.9% 2.3%	13.1% 3.0% 1.8%	13.6% -2.9 1.2
LIQUIDITY RATIO i. Current Ratio ii. Acid Ratio iii. Cash Ratio	6.74 6.34 1.87	6.48 6.10 1.86	1.91 1.81 0.57
FINANCIAL LEVERAGE RATIO i. Debit Ratio ii. Debit to Equity iii. Interest Coverage	0.87 6.64 6.56	0.91 10.86 8.25	0.92 10.87 9.22
MARKET RATIO i. Price to Earnings ii. Forward Price to Earnings iii. PEG Ratio iv. Dividend Yield	12.5 11.4 1.25 2.47%	12.7 11.6 1.2717 2.54%	12.6 11.4 1.28 2.50
ASSET MANAGEMENT RATIO i. Cash Turnover ii. Inventory Turnover iii. Accounts Receivable Turnover iv. Account Payable Turnover v. Cash Conversion Cycle	10.15 16.62 1.68 6.56 183.22	8.53 15.77 1.63 0.93 -146.62	7.91 19.87 1726.55 1.56 -177.87

Appendices

FORD COMPANY BALANCE SHEET FOR YEAR 2011-2013
View: Annual Data | Quarterly Data All numbers in thousands Period Ending Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Assets Current Assets Cash And Cash Equivalents 14,468,000   15,659,000   17,148,000   Short Term Investments 22,100,000   20,284,000   18,618,000   Net Receivables 87,309,000   81,869,000   78,541,000   Inventory 7,708,000   7,362,000   5,901,000   Other Current Assets - - - Total Current Assets 131,585,000   125,174,000   120,208,000   Long Term Investments 3,679,000   3,246,000   2,936,000   Property Plant and Equipment 47,600,000   40,245,000   35,209,000   Goodwill - - - Intangible Assets - - 100,000   Accumulated Amortization - - - Other Assets 5,847,000   5,556,000   4,770,000   Deferred Long Term Asset Charges 13,315,000   15,185,000   15,125,000   Total Assets 202,026,000   189,406,000   178,348,000   Liabilities Current Liabilities Accounts Payable 19,531,000   19,308,000   63,093,000   Short/Current Long Term Debt - - - Other Current Liabilities - - - Total Current Liabilities 19,531,000   19,308,000   63,093,000   Long Term Debt 114,688,000   105,058,000   99,488,000   Other Liabilities 40,462,000   48,259,000   - Deferred Long Term Liability Charges 598,000   470,000   696,000   Minority Interest 33,000   42,000   43,000   Negative Goodwill - - - Total Liabilities 175,312,000   173,137,000   163,320,000   Stockholders' Equity Misc. Stocks Options Warrants 331,000   322,000   - Redeemable Preferred Stock - - - Preferred Stock - - - Common Stock 40,000   40,000   38,000   Retained Earnings 23,658,000   18,077,000   12,985,000   Treasury Stock (506,000) (292,000) (166,000) Capital Surplus 21,422,000   20,976,000   20,905,000   Other Stockholder Equity (18,231,000) (22,854,000) (18,734,000) Total Stockholder Equity 26,383,000   15,947,000   15,028,000   Net Tangible Assets 26,383,000   15,947,000   14,928,000

Ford Motor Co. (F)

Income Statement for 2011-2013
Period Ending Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Total Revenue 146,917,000   133,559,000   135,605,000   Cost of Revenue 128,094,000   116,107,000   117,225,000   Gross Profit 18,823,000   17,452,000   18,380,000   Operating Expenses Research Development - - - Selling General and Administrative 13,176,000   11,494,000   10,884,000   Non Recurring 208,000   77,000   (36,000) Others - - - Total Operating Expenses - - - Operating Income or Loss 5,439,000   5,881,000   7,532,000   Income from Continuing Operations Total Other Income/Expenses Net 1,322,000   1,964,000   1,466,000   Earnings Before Interest And Taxes 7,830,000   8,433,000   9,498,000   Interest Expense 829,000   713,000   817,000   Income Before Tax 7,001,000   7,720,000   8,681,000   Income Tax Expense (147,000) 2,056,000   (11,541,000) Minority Interest 7,000   1,000   (9,000) Net Income From Continuing Ops 8,224,000   6,253,000   20,713,000   Non-recurring Events Discontinued Operations - - - Extraordinary Items - - - Effect Of Accounting Changes - - - Other Items - - - Net Income 7,155,000   5,665,000   20,213,000   Preferred Stock And Other Adjustments - - - Net Income Applicable To Common Shares 7,155,000   5,665,000   20,213,000

References

Argosy University Online (2012) Financial Management: Assessment tools. Retrieved from http://myeclassonline.com

Argosy University Online (2012) Financial Management: Short-term planning and long- term planning.

Retrieved from http://myeclassonline.com

Zacks Investment Research. (2015). Zacks.Our research. Your success. Retrieved from www.zacks.com/stock/quote/F/balance-sheet

Weston, J. (1990). Essentials of Managerial Finance. Hinsdale: Dryden Press. p. 295. ISBN 0- 03030700-3