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Analyze Financial Report "ford Motor Company"

Essay by   •  July 21, 2012  •  Case Study  •  2,587 Words (11 Pages)  •  1,279 Views

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Analyze financial report "Ford Motor Company"

Ford Motor Company is one of the largest automobile producers worldwide, in the U.S. is the second-leading auto manufacturer. The market share of 2011 first nine months is 16.5%. U.S. economy as today Ford is facing increased competition from foreign companies as they increase imports to the U.S. Unfavorable currency translation rates remain a constant problem for the Company.

During a time of crisis throughout the auto industry in recent years, Ford in a position to survive the steepest sales downturn without a government bailout that helped the company improve its reputation and win new customers.

The profit analyzed for the next four quarters U.S economy stays the same as today

Based on the most-recent quarter pre-tax operating profit, for the year of 2011 Fords earned an operating profit of $6.2 billion in North America. Focus of new-product introductions along with the downsizing actions at the other U.S. - based manufacturers. With its new Focus, compact allow Ford to regain market share over the next few years after has been losing share in the U.S. market every year since 1995. Ford will continue its shift to smaller cars and away from trucks.

In March 2012, Ford had its best month in five years. It's U.S. sales rose 5 on strong demand for the Focus small car. Ford reported strong sales, pushing the industry to its best quarter since before the recession, even though gasoline prices climbed to more than $4 a gallon in many states. March sales highlight:

Fusion set an all-time monthly sales record, with 28,562 vehicles sold.

Focus delivered its best March sales performance ever, selling 28,293 cars.

F-Series sold 58,061 for the month - a 9 percent increase versus last March and F-Series' best March sales performance since 2007. EcoBoost accounted for 41 percent of the F-150 retail sales, with all V6 engines comprising 56 percent for the month.

The Ford Edge had it the best March sales month ever, with 14,058 vehicles sold.

Ford began selling its Police Interceptor Sedans and Utilities at the end of March.

Ford's current strength stems from a decision in 2006 to borrow $23.6 billion. That money helped Ford move more quickly than General Motors or Chrysler to bring out new lines of more fuel-efficient vehicles, provided a cash cushion along with the economy in late 2008. Ford also sold off luxury brands, including Jaguar and Land Rover to the Tata Group of India for $2.3 billion in 2009. In March 2010, Ford reached an agreement to sell its Volvo subsidiary to a Chinese conglomerate.

Ford passed Toyota as the Number Two sellers, sold about 8.42 million vehicles in the United States in 2010. Alan R. Mulally, unveiled an aggressive strategy to increase the company's worldwide sales to 8 million vehicles a year from 5.3 million. Ford also catch-up in Asia where competitors like Toyota, General Motors and Volkswagen have larger shares and better brand recognition.

In the next four quarter, economic distress of suppliers who may require Ford to provide substantial financial support or take other measures to ensure supplies of components and could increase the costs, affect liquidity, or cause production constraints or disruptions; Fluctuations in foreign-currency exchange rates, commodity prices, and interest rates; Failure of financial institutions to fulfill commitments under committed credit facilities; Inability of Ford Credit to obtain competitive funding; Restriction on use of tax attributes from tax law "ownership change"

Other Economic Factors, the eventual implications of higher government deficits and debt, with potentially higher long-term interest rates, could drive a higher cost of capital over planning period. Higher interest rates and/or taxes to address the higher deficits also may impede real growth in gross domestic product and, therefore, vehicle sales over the planning period. Ford is likely to lose between $500 million and $600 million in 2012 in the 19 European markets to the ongoing debt crisis in the region. The figure compared with a meager $27 million loss recorded by the company in 2011. In the fourth quarter of last year, the loss amounted to $190 million. The West European car market is expected to decline to 11 million units in 2012.

Ford should remain focused on delivering the key aspects of the One Ford plan, which are unchanged from a project the profit for the next four (4) quarters:

Aggressively restructuring to operate profitably at the current demand and changing model mix

Accelerating the development of new products that customers want and value.

Financing the plan and improving the balance sheet

Working together effectively as one team, leveraging Ford's global assets

Within Automotive gross cash portfolio, remain to currently do not hold investments in government obligations of Greece, Ireland, Italy, Portugal, or Spain, nor did hold any on December 31, 2011. Aggressive plans in Russia, the Ford Sollers partnership that builds the Focus and Mondeo, reported sales of 27,232 Ford vehicles in the first quarter, a sizable increase over 20,919 in the same period last year.

The big seller was the Focus, with 19,596 sold, up from 15,343 in the first quarter of 2010. The Focus was voted Russia's 2012 car of the year in a recent survey.

Ford Financial ratios analyzed to determine be a wise investment opportunity

Any investor interested in the fundamentals should be able to calculate financial ratios from memory. It need to understand how to read, analyze a full and accurate understanding.

Ratio data as of 12/31/2011

Current Ratio breakdown for Ford

Ford Current Ratio= (Current Asset)/(Current Liabilities)=1.60x

The current ratio is the test of a company's financial strength. It calculates by dividing the Current Assets of a company by its Current Liabilities to measures a company has enough cash or liquid assets to pay debts that due to the same year and over the next fiscal year. The ratio is regarded as a test of liquidity for a company.

Typically, short-term creditors will prefer a high current ratio because it reduces their overall risk. However, investors may prefer a lower current ratio since they are more concerned about growing the business using assets

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