Financial Ratios and Ford Essay Example
Financial Ratio Analysis Paper
Dehlia Lopez
FIN/575
March 25, 2010
University of Phoenix
Financial Ratio Analysis Ford Motor Company is one of the automotive industries largest and most successful auto makers with more than 164,000 employees and seventy manufacturing plants world wide, (Ford Motor Company, 2013). The firm is led by President & CEO, Alan Mulally who drives with a ”One Team, One Plan, One Goal, One Ford business strategy for achieving success”, (Ford Motor Company, 2013). Throughout this paper, Learning Team B will explore the financial condition of Ford Motor Company based on the following financial ratio calculations; · Profitability ratios · Liquidity ratios · Activity ratios · Solvency ratios In addition to the calculations, Learning Team B will provide a synopsis of the firm’s debt, cash availability, asset usage, profitability as well as a review of the firm’s ROE, leveraging the DuPont method.
Profitability Ratios Profitability ratios articulate the overall profitability of a company. Sales and revenue for the company may be high but if the company is spending large amounts on expenses and taxes the profits for the company may be low. Profitability ratios include: • Return on equity (ROE) – the amount of income represented by the owner investment. Ford Motor has a ROE of 35.5%. • Return on capital (ROC) –the percentage of the company net income generated outside the capital readily available by the company. Ford Motor has a ROC of 2.97%. • Net profit margin (NPM) – the primary profitability ratio that states the percentage of each dollar of sales remaining after paying costs and income taxes. The result of net profit margin is the bottom line for the company. Ford Motor has an NPM of 4.22%. • Operating profit margin (OPM) – the percentage of each dollar of sales that remains after paying all expenses excluding income taxes. Ford Motor OPM is 4.7%.
Dehlia Lopez
FIN/575
March 25, 2010
University of Phoenix
Financial Ratio Analysis Ford Motor Company is one of the automotive industries largest and most successful auto makers with more than 164,000 employees and seventy manufacturing plants world wide, (Ford Motor Company, 2013). The firm is led by President & CEO, Alan Mulally who drives with a ”One Team, One Plan, One Goal, One Ford business strategy for achieving success”, (Ford Motor Company, 2013). Throughout this paper, Learning Team B will explore the financial condition of Ford Motor Company based on the following financial ratio calculations; · Profitability ratios · Liquidity ratios · Activity ratios · Solvency ratios In addition to the calculations, Learning Team B will provide a synopsis of the firm’s debt, cash availability, asset usage, profitability as well as a review of the firm’s ROE, leveraging the DuPont method.
Profitability Ratios Profitability ratios articulate the overall profitability of a company. Sales and revenue for the company may be high but if the company is spending large amounts on expenses and taxes the profits for the company may be low. Profitability ratios include: • Return on equity (ROE) – the amount of income represented by the owner investment. Ford Motor has a ROE of 35.5%. • Return on capital (ROC) –the percentage of the company net income generated outside the capital readily available by the company. Ford Motor has a ROC of 2.97%. • Net profit margin (NPM) – the primary profitability ratio that states the percentage of each dollar of sales remaining after paying costs and income taxes. The result of net profit margin is the bottom line for the company. Ford Motor has an NPM of 4.22%. • Operating profit margin (OPM) – the percentage of each dollar of sales that remains after paying all expenses excluding income taxes. Ford Motor OPM is 4.7%.