Saturday, December 28, 2019

Ford Motor Company Analysis Free Essay Example, 2000 words

On the other hand the inventory turnover increased from 17.65 times to 19.20 times. This shows that the inventory of the firm was utilized effectively in raising good returns on the sales on the firm. Number of days in sales of A/R increased from 0.0013 to 0.58. This depicts that the collection period for the receivables increased from 2010 towards 2011. This is too risky for the firm as the company can end up being indebted by its customers. Lastly in regard to the number of days in sales of inventory also increased from 0.0001 to 0.05 which shows the number of days it takes for the replenishment of the inventory increased greatly. The inventory seems to be moving slow which affects the volume of sales by the firm. In return, the sales revenues are jeopardized in the process of slow movement of inventory Profitability ratios Profitability ratios depict the firm’s ability to make use of its assets and regulate its expenses to obtain considerable returns for the company. This is normally the ultimate goal of most starting firms-to generate profits. The ratios calculated include; gross profit margin which is derived before the firm realizes the expenses from its operation. We will write a custom essay sample on Ford Motor Company Analysis or any topic specifically for you Only $17.96 $11.86/pageorder now On the other hand, the net profit margin is derived after including the expenses incurred by the Ford Motors. The gross profit margin for 2010 equaled 19% which went down to 16% in 2011 indicating a reduction in profitability of the company. The net profit margin was -0.5% which increased to 11% in 2011. This is an indication that Ford Motors was able to control its expenses in 2011 compared to the way it administered in 2010. Besides, the net operating profit increased from 5 % to 14.8% where a similar explanation applies. The EPS, ROA and the ROE also recorded an increase. From these observations, it is clear that the company is able to control its expenses more easily compared to the cost of sales by the company. Debt Ratios Debt ratios depict the sources of financing for the company. The debt ratio reduced from 1.00 to 0.92. This has a meaning that the company reduced its dependence on debts to equity from the firm. The volume of debts reduced in year 2011. On the other hand the interest earned ratio also increased from1.16 in year 2010 to 1.96 in year 2011. This shows the firms’ interest payment from the previous debts is still mounting with time. The interest earned ratio is a good gadget for determining the firm’s capability to fulfill its debt obligations. If the value is less than 1, it is an indication that the company is accumulating enough liquid cash in its EBIT operations to fulfill the obligations in regard to interest payment.

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